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 is written off or stolen. However, accidents happen, and that’s where GAP insurance could provide vital financial protection.
What Is GAP Insurance?
Guaranteed Asset Protection (GAP) insurance is designed to cover the difference between what your motor insurer pays out if your car is written off or stolen, what you originally paid for the vehicle, and what you still owe on finance
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 this 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 finance agreement. Without GAP insurance, you would have to cover that £5,000 difference yourself.
Types of GAP Insurance
There are several types of GAP cover, 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.
Who Should Consider GAP Insurance?
GAP cover may be worth considering if:
- You bought a brand-new car
- You have a car on finance or lease with significant payments outstanding
- You would struggle to afford a new car or repay the shortfall if your vehicle is written off
- You want peace of mind against depreciation
Some finance providers include GAP insurance in their agreements, so it's worth checking your documents before buying a separate policy. Also, be cautious about buying GAP cover from dealerships; it may be cheaper and more tailored if purchased through an insurance broker like TMD.
How TMD can help
We take the time to understand your personal circumstances and vehicle financing arrangements, helping you find the right GAP cover to protect your investment.
Whether you're buying outright, financing or leasing, we’ll ensure you’re not left out of pocket in the event of a total loss.
👉 Get in touch today to speak to one of our advisers about GAP Insurance.
📞 01992 703 000
📧 insurance@mcdonaghs.co.uk