What Is Gap Insurance for Cars and Do You Need It?
Understanding Gap Insurance
Gap insurance - short for Guaranteed Asset Protection - covers the difference between what your car insurer pays out if your vehicle is written off or stolen, and what you still owe on your finance agreement. A brand new car can lose 15 to 25 percent of its value the moment you drive it off the forecourt. If it is written off a month later, your comprehensive insurer pays out current market value - potentially leaving you thousands short of what you owe on finance.
Types of Gap Insurance
Finance Gap Insurance
Covers the shortfall between your insurer's payout and the outstanding amount on your finance agreement (PCP, HP, or lease). This is the most common type.
Return to Invoice (RTI)
Pays the difference between the insurer's payout and the original invoice price you paid. Useful if you paid cash or a large deposit.
Vehicle Replacement Gap
Covers the cost of replacing the car with a new equivalent model at current prices - the most comprehensive type.
Who Needs Gap Insurance?
- Bought a new or nearly-new car on PCP or HP finance
- Have a car that depreciates quickly
- Put down a small deposit leaving a large outstanding balance
- Drive high mileage, which accelerates depreciation
Where to Buy
Dealerships offer gap insurance at point of sale but this is often the most expensive route. From 2024, FCA rules require dealers to give you a pause period to shop around. Independent providers like ALA and MotorEasy often offer the same or better cover at lower cost. Typical cost is 100 to 300 pounds for a 3-year policy.
