When your new car drives off the forecourt, it can lose 10-15% of its value immediately. GAP insurance protects against this — but only if you buy it right.
For the wider cluster covering cover types, premium drivers, savings strategies, and claims decisions, use the main Car Insurance hub.
What Is GAP Insurance?
GAP stands for Guaranteed Asset Protection. It covers the “gap” between:
| What Your Insurer Pays | vs | What You’ve Lost |
|---|
| Current market value of written-off car | | Original price you paid |
| Current market value | | Outstanding finance balance |
Example: Why You Need It
| Scenario | Without GAP | With GAP |
|---|
| Bought car for | £25,000 | £25,000 |
| Car written off after 2 years | - | - |
| Insurance payout (market value) | £17,000 | £17,000 |
| Outstanding finance | £15,000 | £15,000 |
| Your loss | £8,000 | £0 |
Without GAP insurance, you’ve lost £8,000 and may still owe money on a car you no longer have.
Types of GAP Insurance
Return to Invoice (RTI)
| What It Does | Best For |
|---|
| Pays difference between payout and original invoice price | Cash buyers, want full amount back |
Example: Paid £25,000, insurance pays £17,000, RTI pays you £8,000
Return to Value (RTV)
| What It Does | Best For |
|---|
| Pays difference between payout and value when bought (if second-hand) | Second-hand car buyers |
Example: Paid £15,000 for used car worth £18,000 new, insurance pays £11,000, RTV pays £4,000
Finance GAP
| What It Does | Best For |
|---|
| Pays difference between payout and outstanding finance | PCP/HP finance customers |
Example: Owe £18,000 on finance, insurance pays £15,000, Finance GAP pays £3,000
Vehicle Replacement Insurance (VRI)
| What It Does | Best For |
|---|
| Pays enough to replace with equivalent new car | New car buyers who want newest model |
Example: Original car £25,000, equivalent new model now £27,000, VRI covers the difference
Combined RTI + Finance GAP
| What It Does | Best For |
|---|
| Pays whichever is higher — invoice price or finance settlement | Finance customers wanting maximum protection |
When GAP Insurance Is Most Valuable
High Value
| Situation | Risk Level | GAP Value |
|---|
| New car (high depreciation) | High | Very valuable |
| Car on PCP/HP (owe more than value) | High | Very valuable |
| Low deposit on finance | High | Very valuable |
| Long finance term (4-5 years) | High | Very valuable |
Lower Value
| Situation | Risk Level | GAP Value |
|---|
| Old car (slow depreciation) | Low | Limited value |
| Large deposit paid | Medium | Some value |
| Short finance term | Low | Limited value |
| Car under £5,000 | Low | May not be worth it |
When You Probably DON’T Need GAP Insurance
| Situation | Why |
|---|
| Car is over 7 years old | Depreciation has flattened |
| Car worth under £3,000 | Gap likely very small |
| You could afford the shortfall | Self-insure |
| Buying very short term | Limited exposure |
| Comprehensive policy already generous | Check existing cover first |
How Much Does GAP Insurance Cost?
Dealer vs Standalone
| Source | Typical Cost | Cover Period |
|---|
| Dealer (avoid) | £300-600 | 3 years |
| Standalone (online) | £100-250 | 3-4 years |
| Savings | £150-400 | - |
Always buy standalone — dealers mark up GAP insurance significantly.
Standalone Providers
| Provider | Typical Cost | Notes |
|---|
| ALA | £99-249 | Popular, good reviews |
| Direct Gap | £99-229 | Wide range of options |
| Click4Gap | £79-199 | Budget option |
| Gap Insurance UK | £99-249 | Comprehensive |
Buying GAP Insurance: Timing
Deadline
| Situation | Deadline |
|---|
| New car | Usually within 90 days of purchase |
| Used car | Usually within 180 days of purchase |
| Adding mid-term | Most providers won’t cover |
Don’t delay — you can’t add GAP insurance later if you miss the window.
14-Day Cancellation Right
If you bought dealer GAP insurance, you have 14 days to cancel for a full refund. Use this time to find a cheaper standalone policy.
What GAP Insurance Doesn’t Cover
| Exclusion | Notes |
|---|
| Mechanical breakdown | That’s warranty |
| Accidents you cause | Standard insurance covers this |
| Wear and tear damage | Nor damage charges |
| Excess on insurance claim | Usually excluded |
| Personal items in car | Home contents insurance |
| Mileage charges (PCP) | Separate from write-off |
Claims Process
What Happens If Your Car Is Written Off
| Step | Action |
|---|
| 1 | Claim on standard car insurance |
| 2 | Receive market value payout |
| 3 | Claim on GAP insurance for shortfall |
| 4 | GAP insurer pays difference |
What You’ll Need
| Document | Purpose |
|---|
| Insurance payout letter | Shows what you received |
| Original purchase invoice | Proves what you paid |
| Finance settlement figure | Shows what you owe |
| GAP policy documents | Your coverage details |
Reading the Small Print
Key Terms to Check
| Term | What to Look For |
|---|
| Maximum payout | Often capped at £10,000-25,000 |
| Claim deadline | How long you have to claim |
| Settlement basis | Invoice, finance, or value |
| Excess | Some have small excess |
| Age/mileage limits | May not cover older/high-mileage cars |
Questions to Ask
| Question | Good Answer |
|---|
| What’s the maximum payout? | Higher than your potential gap |
| Is it RTI, Finance, or combined? | Matches your situation |
| Any excess to pay? | None or low |
| Claim deadline? | 60+ days |
| Do you cover negative equity? | Yes (if rolling finance) |
PCP-Specific Considerations
Negative Equity Protection
If you’re rolling negative equity from a previous PCP into a new deal, standard GAP may not cover this. Ask specifically:
| Scenario | Coverage |
|---|
| Standard GAP | May only cover new car’s invoice price |
| Negative equity GAP | Covers rolled-over debt too |
Example: Negative Equity
| Item | Amount |
|---|
| Old car trade-in value | £10,000 |
| Old finance settlement | £12,000 |
| Negative equity rolled into new deal | £2,000 |
| New car price | £25,000 |
| Total new finance | £27,000 |
Standard GAP might only cover £25,000. Negative equity GAP covers £27,000.
Is GAP Insurance Worth It?
Simple Decision Framework
| Question | Yes = Consider GAP | No = Probably Skip |
|---|
| Is the car worth over £8,000? | ✅ | ❌ |
| Are you on finance? | ✅ | ❌ |
| Was deposit under 30%? | ✅ | ❌ |
| Would losing £5,000+ hurt financially? | ✅ | ❌ |
| Is the car under 5 years old? | ✅ | ❌ |
If you answered “yes” to 3+ questions, GAP insurance is worth considering.
Cost-Benefit
| GAP Insurance | Potential Claim |
|---|
| £150 for 3 years | £5,000-15,000 protection |
| Peace of mind | Priceless if you need it |
| Never claim | £150 “wasted” (insurance working as intended) |
Alternatives to GAP Insurance
| Alternative | Pros | Cons |
|---|
| Larger deposit | Less owed, smaller gap | More cash needed upfront |
| Shorter finance term | Less time for gap to grow | Higher monthly payments |
| Self-insure (savings) | Keep premiums | Need discipline, might not have enough |
| HP instead of PCP | Build equity faster | Higher payments |