At a glance
GAP insurance can cover the difference between your car’s market value and the price you paid for it if it’s written off.
It may be beneficial if you have a new car, or you bought your car on finance with a large loan.
You can only get GAP insurance if you have a comprehensive car insurance policy.
Compare the Market doesn’t compare GAP insurance.
What is GAP insurance?
GAP insurance, or Guaranteed Asset Protection insurance, can cover the difference between the price you originally paid for your car and its current market value.
It could be useful if your car is written off or stolen. That's because your insurance provider may only pay out what it is worth at the time of the incident, which will likely be lower.
Bridging the financial gap could help cover the cost of buying a new vehicle or pay off any amount you still owe on finance.
GAP insurance is entirely optional. You’re under no obligation to buy this form of cover.
Car depreciation
How quickly your car loses value depends on the make and model.
According to MoneyHelper, your new car could be worth 15-35% less by the end of its first year. And after three years, it could have lost more than 50% of its value.
How does GAP insurance work?
You can normally buy GAP insurance either as an add-on to your comprehensive car insurance or from a different provider as a standalone policy.
You can’t buy GAP cover if you have third-party or third-party, fire and theft insurance.
If your car is stolen or written off during the policy term, GAP insurance can pay out in addition to your comprehensive car policy.
Say, for example, you buy a £25,000 car that depreciates by 20% after one year. If your car was written off at this point, your insurance provider would only pay out the current market value of £20,000.
GAP insurance could cover the extra £5,000 you paid. So, you could get a new car of the same value.
Most GAP insurance providers will require you to take out cover within 12 months of buying your car. GAP insurance is typically associated with new cars because these tend to lose their value faster than second-hand cars.
How to take out GAP insurance
Policies vary in term length. Typically, they last between one and five years, and it’s worth shopping around to make sure you’re getting a good deal.
Once you’ve found a suitable policy, read through the terms carefully so you understand what’s covered and what’s not.
You can’t get a GAP insurance quote with Compare the Market.
How to claim on your insurance
If your car is written off or stolen during the policy term, you’ll first need to claim on your car insurance policy.
If that claim is approved and your provider agrees that the car is a total loss, contact your GAP insurance provider before you accept their settlement.
There may be a time limit to claim on your GAP insurance. Check the policy's terms to understand the process and what information you’ll need to give.
Getting your payout
If both claims are approved, you’ll get two payouts. The first, from your regular car insurance provider, will cover the value of the car at the time of the damage/theft.
The GAP insurance payout should cover any shortfall agreed on the policy terms, up to the maximum claim limit.
If you bought your car on finance, check with your GAP insurance provider to see how any outstanding loans will be settled.
They may not be automatically paid off, even if you bought your GAP insurance from your car finance or lease provider.
Resolving problems with your claim
If you’re unhappy with the outcome of a claim, you can raise this via your GAP insurance provider’s official complaints process.
If you’re not satisfied with their response, you can take your complaint to the Financial Ombudsman Service.
Types of car GAP insurance
There are six main types of GAP insurance policy:
Finance cover – if you’ve taken out car finance, this will cover any outstanding repayments if your car is written off.
Return-to-invoice – covers the difference between your car insurance payout and the exact invoice price you paid for your car.
Return-to-value – instead of paying out what you paid for the car upfront, this tops up the difference between the payment from your insurance provider and your car’s value when it was new.
Vehicle replacement – covers the new price of the exact model and specification of your car, even if the price has gone up. This could be useful if you negotiated a discount with a dealer at the time you originally bought the car.
Negative equity cover – offers protection if the value of your car falls, leaving it worth less than the loan you’ve taken out on the car.
Lease cover – also called Contract Hire GAP insurance, this could cover all pre-determined repayments that come with your leasing agreement. This may include the early repayment charge and sometimes even the deposit you paid at the beginning of your contract.
What's excluded from GAP insurance?
There are some things GAP insurance typically won’t cover:
Those with third-party insurance – You won’t be covered if you only have third-party cover. You must have comprehensive car insurance.
Claims resulting from breaking the law – for example, driving under the influence or without a valid licence.
Cars over a certain age or mileage – policies may impose limits. And it may also be harder to find cover for high-value vehicles.
Anything other than total loss or theft – you’ll usually only be covered if your car is either stolen or deemed a ‘total loss’ by your insurance provider.
Accidents where a non-named driver was at the wheel – you’ll likely only be covered if the total loss claim is the result of an accident involving a named driver.
Cars used for business – standard GAP insurance typically won’t cover cars used for business, or for hire and reward. The same goes for vehicles used in racing competitions and rallies.
Any amount deducted by your insurance provider – for example, due to unpaid premiums.
Non-standard modifications – GAP cover won’t pay out for non-standard modifications you added after you bought the car.
Cars not listed in Glass’s Guide – this is an industry-wide vehicle valuation service, and some providers may refuse to offer GAP cover to unlisted vehicles.
Is GAP insurance worth it?
GAP insurance might be worth it if:
You took out a large finance loan to buy your car and you could owe more than the car is worth at market value if it’s written off as a total loss.
Your car is an expensive model that depreciates very quickly.
Your car is hired on a long-term lease.
Your car is only a couple of years old, but you want a brand-new replacement if it’s written off as a total loss.
GAP insurance might not be worth it if:
Your car is less than a year old and you have new car replacement cover included in a comprehensive car insurance policy. Check the terms and conditions of your policy to make sure.
You’d be happy with a like-for-like replacement for the car and don’t need it to be a brand-new vehicle.
You have a second-hand car and there’s not much difference between the purchase price and the price your insurance provider will pay out.
How much is GAP insurance?
The cost of GAP insurance can vary significantly, depending on:
The make, model, age and value of your vehicle – more valuable cars are more expensive to insure
The contract length – GAP insurance policies typically run from one to five years, often to align with a car finance or lease agreement
The type of policy you choose – higher levels of cover will usually cost more.
How might I get cheaper GAP insurance?
Though some factors might be out of your control, there are a few ways you may be able to get cheaper GAP insurance.
Consider the type of GAP insurance you’re buying
A vehicle replacement policy could be more expensive than a return-to-invoice policy. That’s because the potential payout could be higher. So, consider your needs carefully before you commit to a policy.
Shop around and compare quotes
Shopping around and comparing a range of quotes is one of the easiest ways to make sure you’re getting a good deal on your GAP insurance.
You can’t currently compare GAP cover with Compare the Market.
Are there any alternatives to GAP insurance?
An agreed value policy guarantees a set payout if your car is written off or stolen. The payout is based on the car’s market value at the start of the policy, disregarding any depreciation that’s taken place since.
This type of policy is aimed at drivers of unique and rare vehicles. For example, high-performance cars, classic cars, kit cars and some modified cars. Just be aware that you’ll need to produce extensive paperwork to show the original value of the car.
While your payout might be higher with an agreed value insurance policy, your premiums are likely to be higher, too. You’ll also have less choice as fewer providers offer this type of cover.
Compare the Market doesn’t currently compare agreed-value insurance policies.
Compare car insurance
You can’t get a GAP insurance quote with Compare the Market. But we can help you compare quotes for car insurance.
FAQs
Are GAP insurance policies just for new cars?
No, GAP insurance policies aren’t just for new cars – although it’s typically more useful for brand-new vehicles. That’s because new cars tend to depreciate much faster than used cars.
You can still get GAP insurance for used cars. Just keep in mind that the benefits are potentially far less significant.
Can you buy GAP insurance after you buy a car?
Yes, you can buy GAP insurance after you’ve bought a car. But most insurance providers will require you to take out cover within 12 months of buying the car.
There are some providers, however, that will let you take out GAP cover after 12 months.
What is the maximum GAP insurance will pay?
The maximum your GAP insurance will pay out depends on the type of cover you choose and the maximum claim limit detailed in your policy.
The maximum claim limit is usually based on how much your car is expected to depreciate over time. And, in some cases, it could mean you’re left short.
Not all GAP insurance providers have an upper claim limit. But you could end up paying hefty premiums for that privilege.
Looking for something else?
With more than eight years’ experience in writing and sub-editing content, Karen started her career in fashion before making the move to insurance. She now specialises in producing clear, engaging content that helps people make better financial decisions.
Karen’s areas of expertise include insurance products, such as car insurance, travel insurance and life insurance, as well as utilities such as energy comparison.
Stephen Maunder is an experienced personal finance editor, having spent more than a decade working for consumer print and online titles. He won several industry awards for his personal finance features at Which?, before becoming Deputy Editor at Compare the Market.
Amy helps make sure you get the best value when choosing insurance. Thanks to more than four years’ experience at Compare the Market, she understands what people look for, working closely with insurance providers to offer you deals and services that are fair, easy to understand and right for your needs.
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