If you’ve heard of GAP insurance but aren’t entirely sure what it is or how it works, this guide is for you.
If you’re confused by GAP insurance and what it does, you’re not alone – our research shows plenty of drivers don’t understand it.
In our guide, Sabine Williams, Head of Motor at Admiral, reveals the 9 most common issues which confuse drivers considering GAP insurance.
“Having your car written off or stolen is an unfortunate, inconvenient and often stressful position to be in and finding out you’re actually out of pocket – even when your insurance pays out – feels like rubbing salt in the wound.
“The overriding benefit GAP insurance offers drivers is the peace of mind in knowing they won’t be suffering a financial shortage, as well as being without a car.”
“Many people don’t know what GAP insurance is, and even if they have heard about it, a lot of people don’t know exactly what it is, why they need it or how they can benefit from it.”
1. Why is it called GAP?
GAP actually stands for Guaranteed Asset Protection rather than the “gap” between your purchase price and the current value. It can be bought as an add-on to your existing car insurance.
2. GAP only offers one level of cover
This is a myth. In reality, there are five levels of GAP insurance:
1. Finance: This is the most basic level of GAP insurance and covers any outstanding finance left to pay on the car.
2. Return to invoice: This pays the difference between what the car originally cost and what your insurance company will pay out from your main car insurance policy if your vehicle is written off.
3. Vehicle replacement: This is the most expensive level of cover and gives you the money to buy a new version of the car you lost.
4. Return to value: This offers cover up to the value of the car when you bought it, which is handy for anyone who bought an expensive used vehicle.
5. Lease: This covers the rest of the contract costs and any early settlement fees if you’ve leased a car which is written off or stolen.
3. You can only buy GAP insurance from a dealer
This is a myth. It’s true that you can get GAP insurance from the showroom where you bought the car, but there are plenty of other companies offering it online too.
Dealers aren’t legally allowed to sell GAP insurance on the day they sell you the car, and they also have to make sure you know you can get the cover elsewhere.
4. GAP insurance only pays out if your car is stolen
This is a myth. GAP insurance pays out if your car is stolen or written off by your insurance company.
Your car is written off when it’s so badly damaged that it’s beyond economical repair – or in other words, when it’ll cost more to repair it than the car is worth. This is also known as a ‘total loss’.
5. I don’t need GAP insurance because my car insurance already covers this
Some insurers offer “new vehicle replacement cover” for the first 12 months. If your car is written off after the first year, you’ll only get the market value of your car – and this is likely to be much less than the car’s value when you bought it.
6. GAP insurance only covers the policyholder
Most GAP Insurance policies cover the policyholder and anyone named on the vehicle’s comprehensive car insurance policy. If the insurer pays out, GAP will provide the cover.
7. GAP insurance only pays out if the car is being paid for on finance
This is a myth. You can take out GAP insurance if you’ve paid for your car in full or have a loan or car finance.
If you took out car finance in the last 100 days, our GAP policy covers any existing lending if your car is written off or stolen.
8. I can only buy GAP insurance if my car is brand new
GAP insurance is often aimed at newer cars as they tend to depreciate more quickly. If your car is less than five years old and has under 50,000 miles on the clock, it’s eligible for GAP insurance.
9. GAP insurance won’t cover me if my car is written off by an uninsured driver
If you have valid comprehensive insurance and your insurer will pay out on a claim, GAP insurance providers will cover the difference – it doesn’t matter how it happened.
The claim limit is up to the value of the car, as long as your car is worth no more than £50,000. Beyond £50,000 value there are limits.
