GAP insurance might not be the most famous cover out there, but it could save you a serious headache. Officially called Guaranteed Asset Protection, it’s designed to bridge the shortfall between what you paid for your car and what your insurer pays out if it’s written off or stolen.
Here’s the issue: the second you drive off the forecourt, your car’s value starts to fall. Some models plummet quicker than others, but even the best-kept cars lose thousands within the first few years. If the worst happens, your standard insurer only pays the current market value. That could leave you with a hefty gap, whether that’s money you put down in cash, or finance you still owe.
Take a £15,000 motor. A few months later, it’s written off. Your insurer values it at £10,000. Best case? You’ve lost £5,000 on a car you barely had a chance to enjoy. Worst case? You still owe money on finance, and you’re paying off a car you can’t even drive.
That’s where GAP insurance steps in. It protects the money you’ve invested, making sure you’re not left short-changed if disaster strikes.
The different types of GAP insurance
The principle is the same across all types. GAP tops up the difference between your insurer’s payout and what you really need. But the options exist to suit different buying situations.
Finance GAP Insurance
Perfect if you’ve bought your car with a finance agreement or PCP. It covers the shortfall between your insurer’s payout and what you still owe on finance. It’s important to note that it usually won’t cover negative equity.
Negative Equity GAP Insurance
Negative equity happens when the finance you owe is more than the car’s actual value, often from rolling old debt into a new finance deal. Standard Finance GAP won’t touch that, but Negative Equity GAP will.
Return to Invoice GAP Insurance
Does what it says on the tin. It tops up your insurer’s payout back to the invoice price you originally paid for the car.
Return to Value GAP Insurance
Similar to Return to Invoice, but it uses the car’s value at the time you bought the policy instead of the day you bought the car. A good fit if you bought second-hand or owned the car for a while.
Vehicle Replacement GAP Insurance
For anyone who insists on like-for-like. It covers the difference between your insurer’s payout and the cost of a brand-new replacement of the same make and model.
Lease GAP Insurance
If you lease rather than buy, this cover pays off the rest of your contract and any early cancellation fees if your car’s written off.
Do I need it?
GAP insurance isn’t for everyone. Comprehensive car insurance often replaces brand-new cars if they’re written off in the first year, sometimes longer. And if you’d be happy with a like-for-like replacement of the same age and condition, GAP might not be worth it.
But it could be a smart move if:
- You’ve paid a big deposit or lump sum
- You’ve financed or leased your car
- You’d struggle to cover the shortfall yourself
- You’d only want a brand-new replacement, not a used one
Buying GAP insurance
You can usually get GAP insurance through the dealership, but it’s rarely the cheapest option. Instead, use Insureworks for a simple process. Our online tools make signing up easy and, if you ever need to claim on insurance, the process is just as simple. We won’t throw jargon at you. We’ll showcase:
- How long the cover lasts
- What payout limits apply
- Whether negative equity is included
- Any exclusions for mileage, age, or condition
The takeaway
GAP insurance plugs the hole between what your insurer pays and what your car really costs you. With different types available, there’s usually one to suit how you bought your car.
Want to learn more? Head to our Advice Centre for the full run-down, or get a quick GAP insurance quote with us today.