Understand GAP insurance, what it covers, and whether you need it. Compare types, costs, and where to buy GAP insurance for the best price.
·5 min read
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.
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.