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Gap insurance

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Last updated: 12 February, 2020

What is gap insurance?

A new car loses its value, the moment you drive it off the forecourt. While the rate at which this happens depends on the make, model, mileage and condition of your car, the value can fall by 60% after three years, according to The AA.

Gap insurance is an additional cost above your regular car insurance and not included in your car insurance policy.

Car dealerships often offer gap insurance for between £100 and £300 as a flat fee for a three-year policy. With gap insurance, it’s possible to get a pay out that’s enough for a replacement car. If your car is less than a year old, it could mean getting a brand-new car.

What types of gap insurance are there?

There are several types of gap insurance, which include:

  • Return to invoice gap insurance: This covers the difference between the exact price you paid for your car and the motor insurance pay out if your vehicle is written off.

  • Vehicle replacement gap insurance: This covers the difference between the pay out from your car insurance policy and the cost of buying a new car of the same make, model and specifications.

  • Return to value insurance: This covers the difference between the market value of your car when you bought it and the amount you get from your car insurer if you make a claim.

  • Finance gap insurance: This covers the outstanding balance you owe to a finance company if the insurance pay out does not cover your debt.

Which one you choose depends on how you bought your car, and whether or not you want a brand-new replacement if your car is written off. You can read more about how gap insurance works here.

Do you need gap insurance?

Gap insurance isn't for everybody, but it can be useful in some circumstances such as:

You still owe money on your car loan

If you financed your car using a personal loan, and it gets stolen, gap insurance is worth considering. This is because, while your insurance pay out the car cost at the time of theft, you still have to pay back the loan for the car's original value.

What's included in a gap insurance quote?

A gap insurance quote is like any other insurance quote. It gives you a brief overview of what the gap insurance policy will cost, what it'll cover and for how long.

What to consider when you compare gap insurance

  • The value of your vehicle: The value of your car depends on the make, model, specifications and condition.

  • Length of cover: This is the length of time on your policy.

  • Excess: The excess is the amount you pay when you make a claim. It deters people from making claims for minor damage, or making too many claims.

  • How to claim: It's a good idea to be aware of the process before you make a claim.

  • How to cancel: Being familiar with the process of cancelling your policy could help you stop paying for gap insurance you don't need in the future.

Gap insurance FAQs

Gap insurance is not a legal requirement like car insurance, but it can cover your car's loss in value if you write it off.

You can only make a gap insurance claim if your car has been declared a total loss (written off), by your car insurer first.

It depends on the make and model of your car, how much it costs to buy, what cover limit you need and how long you want a policy for.

Most policies will cover the excess you pay to your car insurer up to a set amount, for example £250.

Yes, some policies are designed for cars bought on finance or lease. They will pay off anything you owe after your car insurance has paid out.

No, you should compare gap insurance quotes online first because it is usually much cheaper when you buy direct from the insurer.

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