What Is GAP Insurance and Do You Need It?
When you buy a new car, the last thing you want to think about is what happens if it’s written off or stolen. Yet unfortunately, accidents happen, and that’s where GAP insurance could provide vital financial protection.
Cars depreciate rapidly, particularly in the first few years. Standard car insurance policies usually pay out the market value of your car at the time of the claim. That means if your car is stolen or written off, you could be left with a significant financial shortfall.
GAP insurance fills that gap.
Example Scenario
Imagine you bought a car for £25,000. A year later, it's written off in an accident. Your insurer values the car at £18,000, but you still owe £23,000 on your financing agreement. Without GAP insurance, you would need to cover the £5,000 difference yourself.
There are several types of GAP coverage, including:
Finance GAP Insurance
Pays the shortfall between the insurer’s payout and what you still owe on your car finance.
Return to Invoice (RTI)
Covers the difference between your insurer’s payout and the price you paid for the car.
Vehicle Replacement GAP Insurance
Pays the difference between the insurance settlement and the cost of replacing your car with a new one of the same make and model.
Lease GAP Insurance
Covers the outstanding rental payments if your leased car is written off.
You might want to consider GAP insurance if:
- You bought a brand-new or nearly new car
- You have a vehicle on finance or lease with significant outstanding payments
- You would find it difficult to afford a new car or repay the shortfall if your vehicle is written off
- You seek peace of mind against depreciation.
Some finance providers include GAP insurance in their agreements, so it’s wise to check your documents before purchasing a separate policy. Additionally, be cautious about buying GAP cover from dealerships; it may be cheaper and more tailored if you purchase through an insurance broker, such as TMD.
When you purchase a new car, the last thing on your mind is what to do if it gets written off or stolen. However, accidents do occur, and that’s where GAP insurance can provide essential financial protection.
👉 Get in touch today to speak to one of our advisers on 01992 70300 or insurance@nlig.co.uk