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GAP insurance UK: What is it and do I need it?

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GAP insurance, an acronym for Guaranteed Asset Protection, safeguards vehicle owners in uncertain situations. In the unfortunate event a car is stolen or deemed a total loss, standard car insurance will typically only cover the car’s current market value, which can be substantially lower than the original purchase price. This is where GAP insurance steps in, covering the difference between the original purchase price of the car and the amount your insurance provider pays out. In essence, it ensures you’re not left with a financial gap in such adversities.

What is GAP insurance for cars?

Cars are among the most rapidly depreciating assets you can own, especially if you’ve bought a brand new car. According to the AA, the moment you drive it away from the forecourt, its value plunges by a third, and over the next three years, it drops a further 60 per cent on average. 

If your car is stolen or declared a total loss, the insurance payout typically reflects its current value – less than its initial purchase price, particularly for new vehicles. Consequently, when replacing the car, a financial ‘gap’ emerges between the insurer’s payout and the cost of obtaining that same car, or a comparable new model.

A GAP insurance policy bridges this financial disparity. It covers the gap between what your car insurance pays out and the actual replacement cost of your vehicle.


GAP insurance example

For example, if you purchased a car for £15,000, and later, when its value has fallen to £8,000, it gets stolen, your standard car insurance would compensate you the car’s current value – £8,000. However, with GAP insurance, you’d receive an additional £7,000, bridging the deficit. This ensures you can afford a new vehicle equivalent to the initial price of your previous one.

If you acquired your car through a car finance arrangement, GAP insurance will settle any outstanding balance, ensuring the loan is fully paid off.

GAP insurance policies typically last two to five years and tend to be standalone, unattached to your standard car insurance. Many car insurers provide a ‘new car replacement’ feature. If your new car is stolen or written off due to an accident within the first year, they’ll replace it with a comparable model, making GAP insurance redundant for the first 12 months. 

Your policy should be acquired within a year of purchasing your car. However, some providers allow you to postpone your coverage to the second year, letting you lean on the new car replacement benefit for the first year.

GAP policies can be purchased from comparison sites, such as Money SuperMarket, specialist brokers and car dealerships. However, it’s important to note that dealers cannot sell GAP insurance simultaneously with a car. A minimum of two days between receiving a GAP insurance quote and the actual purchase must elapse. If a dealer offers a quote, use this interim to shop around, as you might find more competitive rates elsewhere.

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How many types of GAP insurance are there?

There are several types of GAP insurance, depending on the specifics of what you wish to cover.

Return to invoice 

Return to invoice (RTI) covers the difference between the insurance provider’s value of the car at the time of the loss and the vehicle’s original purchase price. It aims to return you to the financial position you were in before you purchased the vehicle. RTI cover is typically the cheapest GAP option. 

Return to value 

Return to value insurance covers the difference between the insurance payout and the car’s value at the time you took out the GAP policy. It’s beneficial for those who bought their vehicles second-hand or have had them for a while before deciding to take out GAP insurance.

Finance GAP insurance

Specifically designed for those with outstanding finance on their vehicle, finance GAP insurance covers the gap between the insurance payout and the remaining balance owed on a vehicle finance agreement.

Combined RTI 

This policy blends return to invoice and finance coverage. Your insurer will compensate for the greater amount, be it the initial purchase price of your vehicle or the remaining balance on your finance agreement.

Negative equity 

If you have a car finance deal and owe more than the car’s value at the time of claiming, it’s covered by negative equity GAP insurance.

Vehicle replacement

Vehicle replacement GAP insurance covers the difference between the insurance payout and the cost of a brand new vehicle of the same make, model, and specification. It’s beneficial when vehicle prices have increased since your original purchase.

Contract hire 

Tailored for leased vehicles, this insurance pays the difference between the insurer’s payout and the amount required to settle the lease or contract hire agreement. This can also include any outstanding rental amounts.

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What does GAP insurance cover?

As with any insurance policy, it’s essential to understand the level of coverage you’ll receive. 

GAP insurance cover could include: 

  • Value for the vehicle when it was new: This refers to the initial market value of the car when it first left the forecourt, ensuring that even with depreciation, you’re covered up to the original value
  • Price of any remaining payments on lease agreements: If your vehicle is on lease and it’s written off, GAP insurance can cover the residual amount left on your lease agreement
  • Price of any outstanding payments to a loan on that purchased vehicle: If you took a loan to buy the car, GAP insurance can pay off the remaining balance of that loan, ensuring you don’t end up in debt over a car you no longer have
  • Replacement cost of your vehicle with the same make and model: It promises to cover the cost of replacing your car with one that has the same make, model, and specifications

GAP insurance cover does not include:

  • Repairable damage: If your vehicle is damaged but not totalled, GAP insurance won’t cover the repairs
  • Drivers under the influence of alcohol or drugs: Accidents caused while the driver is under the influence usually void the coverage
  • Driving without a licence: Accidents caused by individuals driving without a valid licence are generally not covered
  • Accidents where a non-named driver is driving: If someone not listed on your policy is driving at the time of the accident, GAP insurance may not pay out
  • Vehicles with non-comprehensive car insurance: If your primary insurance isn’t fully comprehensive, you might not qualify for GAP coverage
  • Business vehicles: Most GAP insurance policies are for personal vehicles. Business or commercial vehicles often require a different policy.

Take out GAP insurance

Generally, GAP insurance is acquired within a year of purchasing your car. Various GAP policies are available, each tailored to cover specific financial concerns related to your vehicle’s loss, whether addressing outstanding car finance or financing a replacement vehicle. 


Always shop around and compare prices and terms from different providers. This ensures you get the best rate and the most suitable coverage.


The policy term

Your coverage stays in effect as long as you maintain your payments. You can only purchase GAP insurance if you have comprehensive car insurance, so this covers most scenarios involving theft, loss, or vehicle damage.


Making a claim

If you need to make a claim, contact your primary insurance provider and have your claim approved. Once approved, and before accepting any settlement offer, contact your GAP insurance provider. They may need to agree to the offer before you accept.


Receiving your GAP settlement

Once you’ve accepted the offer, there’s often a timeframe within which you need to file a GAP insurance claim. If your GAP insurance encompasses finance, it’s prudent to discuss the resolution of any remaining loans and determine whether they’ll be directly settled on your behalf.

Is GAP car insurance expensive?

GAP insurance costs can vary considerably based on several influencing factors, which include:

  • The make and model of your car
  • The car’s age
  • The amount of excess you agree to pay
  • The length of the GAP policy
  • The type of policy you choose

Where you buy your GAP insurance can also be a contributing factor to its cost. A franchised dealership typically charges over 60 per cent more than a GAP insurance provider, with cover costing an average of at least £100 for a fixed three-year policy. 

You may find purchasing gap insurance more cost-effective through a comparison website.

How can I get the cheapest GAP insurance deal?

There are several ways to obtain cheaper GAP insurance. These include:

  • Paying a higher excess: Opting for a higher excess can frequently reduce your premium. By agreeing to cover a more significant portion of the initial costs, insurers often offer a reduced premium. However, you should choose an excess amount you’ll be able to afford in the event of a claim
  • Choose the appropriate GAP insurance type: Picking the right coverage is crucial. RTI GAP insurance policies are generally more affordable, as you’ll receive a payout equivalent to the initial amount you paid for the car. In contrast, vehicle replacement GAP insurance tends to be pricier, as it covers the cost of replacing your vehicle with a brand new model of the same type
  • Compare GAP insurance quotes: Using comparison sites can potentially result in a more affordable GAP insurance deal than directly approaching a dealership. If you find a more cost-effective policy online, ask your dealership if they can match or even better that offer

Is GAP insurance worth it?

Is gap insurance worth it 2
GAP insurance will ensure you can afford to replace your car with a new equivalent if it is written off (Adobe)

While you’re not obligated to purchase GAP insurance, many car owners find it offers invaluable peace of mind. If your new car is stolen or declared an insurance write-off, standard car insurance may only cover its current market value, which could be significantly less than the original purchase price. GAP insurance covers this, ensuring such events do not financially strain you.

Moreover, GAP insurance gives an added layer of protection for those who’ve bought their cars on finance. If you make an insurance claim, the market value payout from your regular car insurance might fall short of covering the outstanding amount you owe on your finance agreement. GAP insurance would cover these outstanding lease payments, preventing additional financial burdens during stressful times.

If you own an older vehicle

Whether GAP insurance is worth it for an older car largely depends on the specific circumstances. As a vehicle ages, its rate of depreciation slows down. Consequently, the gap between what you owe on the car – if you still have an outstanding loan – and its current market value narrows.

GAP insurance may not be as beneficial for drivers who own their older vehicles outright since there’s no outstanding loan amount to cover. The payout from a standard insurance policy in case of a total loss might be relatively close to the market value of the older vehicle.

Frequently asked questions about GAP insurance for cars

You are not legally required to take out GAP insurance on a leased car. However, it might be strongly recommended by the leasing company due to the benefits it offers. When you lease a car, you are responsible for the vehicle. Any financial loss suffered by the leasing company due to theft or damage can be passed on to you.

Typically, once a GAP insurance claim has been made and approved, the policy is considered fulfilled and thus terminates. This means you can only make one claim on your GAP insurance policy. If you subsequently get a new or replacement car and desire similar protection, you must purchase a new GAP insurance policy.

GAP insurance is often considered more beneficial for new cars due to the rapid depreciation within the first few years of ownership. When you drive a new car away from the dealership, its value can drop significantly, sometimes by thousands of pounds, almost instantly. 


However, while new cars experience the steepest depreciation curve, even older cars can depreciate at a rate that might make GAP insurance worth considering, especially if the vehicle has a substantial outstanding finance amount. The benefits might be more limited for older cars, as their depreciation rate slows. Therefore, the potential gap becomes smaller as the car ages.

Katharine Allison

Energy Saving Writer

As Independent Advisor’s energy saving expert, Katharine, a keen advocate for sustainability, is an authority on solar panels, double glazing, and cutting-edge renewable energy technologies. Her dedication merges with a commitment to enlighten and steer readers toward embracing eco-friendly solutions and the latest trends in sustainability.

With over 10 years of experience, she has worked with some of the UK’s leading companies and publications, including the Federation of Master Builders, Architectural Digest, and Denon Construction. 

Katharine is particularly passionate about consumer causes and animal welfare and has art, philosophy, and psychology degrees. She lives with her sled dogs in East Sussex.

Molly Dyson


After growing up with a passion for writing, Molly studied journalism and creative writing at university in her home country of the United States.

She has written for a variety of print and online publications, from small town newspapers to international magazines. Most of her 10-year career since relocating to the UK has been spent in business journalism, writing and editing for admin professionals at PA Life magazine and business travel managers at Business Travel News Europe and representing those titles at conferences around the world.

Now an Editor at the Independent Advisor, Molly is an expert in a broad range of consumer topics, that include solar panels and renewables, home improvements and home insurance, and consumer technology such as home security and VPNs.

In her free time, Molly can usually be found exploring the outdoors with her husband and their young son or gardening.