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Gap Insurance

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Our guide to Guaranteed Asset Protection (GAP) insurance explains how GAP insurance works and how you can get the cover you need

Buying a brand new car can be one of the best feelings in the world. Picking the colour, the upholstery and the modifications, and of course enjoying the legendary new car smell, are all hugely enjoyable experiences.

But if the worst happens – if your car is stolen or damaged beyond repair and written-off – the experience could quickly turn sour.

Your new car insurance policy will only pay out what the car is worth at the time, and it’s likely to be much less than you paid. That’s because new cars can lose up to 40% of their value after their first year, according to the AA.

What is GAP insurance?

GAP insurance protects you when you make an insurance claim and receive a payout that’s less than the cost or value of the car when you bought it. It will pay you the difference so you don’t lose money.

It’s mostly associated with new cars, although you can also buy GAP insurance alongside a second hand car under seven years old – after this the car is deemed old and insurance companies will not cover the gap.

Why have GAP insurance?

It’s well-known that new cars depreciate the minute they are driven off the forecourt.

If you drive 10,000 miles a year in your new car, it could lose 60% of its value after three years, the AA reports. The genuine rate of depreciation depends on make, model and usage, but as an example, a £20,000 car could be worth just £8,000 after three years.

If you bought your car with finance, you could be stuck making repayments for a vehicle you no longer have. And if you paid outright, you will be seriously out of pocket. In both scenarios, you may not be able to afford to replace the car with a similar, new model.

Taking out a GAP insurance policy prevents these worst-case scenarios from becoming reality.

Do you need gap insurance?

Your car insurance policy should allow you to replace your car with another one of a similar age and condition when yours was written off. If this is all that you require from your car insurance, a GAP policy may not be right for you.

You may need GAP insurance if you want to replace your car with another brand new one. It’s also useful if you took out finance to buy your new car: your payout won’t be enough to clear the debt, so you’ll be stuck paying for a written-off vehicle. 

Types of GAP insurance

There are three main types of GAP insurance, all of which will effectively top-up the money you receive from your car insurer.

1.      Return to invoice

Return to invoice cover pays the difference between your car insurer’s maximum or ‘total loss payment’ and the exact price you paid for the car.

2.       Return to value

Return to value cover pays the difference between your insurer’s maximum payment and the value of the car when it was new.

This cover is aimed at car owners who bought their car secondhand.

3.     Vehicle replacement cover

Vehicle replacement cover pays the difference between the insurer’s total loss payment and the cost of replacing it with a new car of the same model, make and specifications.

This cover works for drivers who want to replace their car with a new model - it saves you from having to pay the difference if a like-for-like new car has become more expensive than what you originally paid.

Other variations on the GAP insurance theme are designed to clear your outstanding debt if you bought the car with a loan, or if you have entered into a leasing contract which leaves you with outstanding financial commitments.


Shopping around for GAP insurance

  • You do not have to buy from a car dealer. There are a number of specialist firms that can provide cover.
  • The Financial Conduct Authority, which regulates the insurance market, is encouraging customers to weigh up all their options rather than buying straight from the dealer. Car dealers now need to provide ‘prescribed information’ to help buyers make better informed decisions.
  • GAP insurance cannot be purchased on the day the car is sold. Dealers must wait until the fourth day after handing over the prescribed information. However, there is nothing to stop you buying GAP insurance whenever you want, so you are free to initiative a purchase straight away.

Paying for GAP insurance

As with other types of GAP insurance, you can usually pay your premiums in monthly instalments, spreading the cost over up to 36 months, although this varies depending on the individual provider.

At the end of the 36 months, you can take out cover once again, provided your car does not exceed the seven-year age limit.

At this point, you will have to make a new application, and the car will need to be valued again, but once cover is in place you will have peace of mind that you are financially protected in the event that your car is stolen or written off.

To apply for a GAP insurance policy, you need to be at least 18 and the named driver of the car.

How does our site work?

Moneysupermarket have teamed up with who offer an external GAP insurance comparison service. is a trading name of Comparison Creator Limited, a company registered in England and Wales (Registration Number 07336373). Comparison Creator Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference Number 832239).