It’s annnnoying! Cars lose value faster than you’d like to think. A report from the AA shows a shiny new motor drops by a third the second you drive it away, around 40% after the first year, and up to 60% within three years. That’s a big hit, especially if you’ve forked out thousands. The kicker? Your standard insurer will only pay the market value of the car at the time you make a claim, not what you originally paid.
Let’s put some numbers on it to showcase the issue. Say you splash £15,500 on a brand-new Ford Fiesta. Two years later, it’s written off in an accident. Your insurer will pay out, but only what it’s worth at the time of the accident, which could be £8,000 or even less depending on mileage and condition. That gap is your problem to deal with.
That’s where GAP insurance steps in. It’s designed to work alongside your regular insurance, covering that shortfall so you’re not left with a financial black hole. Depending on the type of GAP cover you choose, it could:
- Top up your insurer’s payout to match the original invoice price of the car
- Clear off any outstanding finance or lease balance
- Even cover the cost of replacing your car with a new one, not just one of similar age and condition
Buying a car isn’t pocket change these days. Whether you’ve paid upfront or signed into a chunky finance agreement, it’s money you’ll want to protect. GAP insurance keeps that investment safe if the worst happens.
When GAP insurance makes sense
GAP insurance is not always essential, but there are key situations where it can reduce the sting:
- Buying a car on finance or lease: If your car’s written off or stolen, standard insurance might not cover the remaining payments. GAP cover will prevent you from paying for a car you can’t even drive. This provides financial breathing room to get you back on the road with a new whip.
- Worried about depreciation: Some cars plummet in value quicker than others. This is especially the case with newer models. GAP helps offset that loss.
- Wanting like-for-like replacement: If you’d only settle for a brand-new motor rather than a second-hand version of what you had, GAP cover can make up the difference.
- Invested a big deposit or lump sum: Protecting that initial spend is a smart move if you’d struggle to cover the loss yourself.
Types of GAP insurance
If you do decide to get GAP insurance, you’ll find that there are different types available:
- Return to Invoice (RTI): Pays the difference between your insurer’s payout and what you originally paid for the car.
- Finance GAP: Covers any remaining finance or lease balance, so you’re not left paying for a car you don’t have.
- Vehicle Replacement GAP (VRI): Pays enough to replace your car with a brand-new version of the same make and model, even if the price has gone up.
Each type is designed for a slightly different situation, so it’s worth checking which fits your needs best.
Buying GAP insurance
Dealerships love to upsell GAP insurance, but the price tag is often inflated. You’ll usually get a better deal by going directly to Insureworks. Before signing anything, there are a few things to double-check. Look at:
- How long the cover runs for
- What maximum payout is included
- Whether there are exclusions for mileage, car age, or condition
- How the policy defines “replacement value”
Sorting it properly means you’ll have the right cover at the right price, without paying over the odds.
The bottom line
GAP insurance isn’t essential for every driver, but if you’ve invested heavily in a car, signed a long finance deal, or simply want the peace of mind that you won’t be left out of pocket, it can be worth every penny.
Want to dig deeper into the different options? Head to our Advice Centre for more guides, or get a quick GAP insurance quote with us today.