What is GAP insurance and how much should you pay for it?
GAP insurance helps drivers get the full retail price for their car if it is stolen or written off, but only a quarter of Brits buy it. We explain how...
If your car is stolen or written off, most car insurance policies will only pay out its current market value, not the amount you paid for it. When you consider that the average new car loses around 40% of its value by the time it’s a year old and between 50% and 60% once it’s three, it’s clear that you could end up seriously out of pocket.
That’s where guaranteed asset protection (GAP) comes in. It’s an additional form of insurance that runs alongside your standard policy, covering the difference between the amount your main insurer will pay out and either what you paid for the car or the amount you’ll need to buy a comparable new replacement. It also pays off any outstanding finance or lease payments.
Traditionally, many drivers who bought GAP insurance purchased it from the same dealership their car came from. However, in 2024 the Financial Conduct Authority (FCA) ordered car dealers to suspend sales of GAP insurance as part of an investigation into its value.
Nevertheless, there are still plenty of companies that will sell you GAP insurance; but is it worth your money?
What types of GAP insurance can I buy?
There are six different types of GAP insurance commonly sold in the UK, which affect exactly what is covered and how much you receive if your car is written off. They are:
- Return to Invoice (RTI) is the most basic form of GAP insurance. This type of policy will increase the ‘total loss’ payout to match the amount you paid for the car
- Return to Vehicle (RTV), sometimes known as Agreed Value GAP insurance, tops up the ‘total loss’ payout to the market value of the car when it was first purchased
- Vehicle Replacement increases the ‘total loss’ figure to cover the cost of a new replacement car – typically a model equivalent to the vehicle that was written off
- Finance covers any outstanding loan payments on a car that has been written off, but this type of policy won’t cover negative equity
- Negative Equity increases the ‘total loss’ payout to cover any loans in which the money taken out exceeds the value of the car
- Lease covers the rest of a leasing contract, including a cancellation fee if the policy includes one
How much should I pay for GAP insurance?
To find out whether it’s a good investment for drivers, we sought GAP insurance quotes for four popular car models: the BMW X5, Kia Sorento, Seat Leon and Volvo EX30. All prices are for a three-year RTI policy in which the customer bought the car, rather than financed it.
Cost of a three-year GAP policy for a new car
| Car | BMW X5 xDrive 50e M Sport | Kia Sorento 1.6 T-GDi HEV 2 | Seat Leon 1.5 TSI 115 PS | Volvo EX30 Core |
| List price | £82,225 | £43,685 | £25,025 | £32,860 |
| ALA | £401.08 | £245.22 | £209.98 | £289.13 |
| Direct Gap | £392 | £235 | £199 | £259 |
| Gap Insurance | £418.86 | £234.09 | £193.03 | £220.39 |
| MotorEasy * | N/A | £290.70 | £268 | £352.47 |
| Total Loss Gap | £335.64 | £199.98 | £186.88 | £228.48 |
* prices based on a 30-year-old driver with five years’ no claims bonus (NCB)
Are any cars excluded from GAP insurance?
Some insurance companies feature restrictions that prevent you from getting cover for certain types of car. These can vary from insurer to insurer, but each company should make it clear via the quote form on their website.
Insurance companies may refuse cover for:
- Cars worth over £75,000
- Cars that are more than 10 years old (although this can be as little as three months for some providers)
- Cars that have covered more than 100,000 miles
- Cars used as taxis or hire vehicles
- Drivers who do not have comprehensive car insurance
Should you buy GAP insurance?
You don’t have to buy GAP insurance at all, and the likelihood of you having to claim on it is very small. Only 1% (384,000) of the UK’s 33 million cars are written off each year, and many of those are older vehicles that are scrapped because they would cost too much to repair.
You might not need GAP insurance for the first year after buying a new car, because many car insurance policies will provide a replacement if the car is written off during that time anyway.
There are certain situations in which GAP insurance could be worthwhile, whether you’re buying a new or used car. They are:
1. Bought on finance
If you’ve bought your car on finance by signing up to a personal contract purchase (PCP) scheme, using hire purchase (HP) or taking out a large personal loan, GAP insurance will cover the big shortfall you could struggle to make up if the car is declared a total loss.
Get a GAP insurance quote now >
2. Bought a car that'll lose value fast
If the car you’re buying is one that will suffer steep depreciation, taking out GAP insurance is sensible, because it will help to make up the difference between the insurance payout and the potentially significant cost of replacing the car.
3. Bought on a lease
If you’ve taken out a long-term lease for a car that is subsequently stolen part-way through the lease. You could be landed with a hefty bill for any outstanding payments, as well as the cost of replacing the car, so GAP insurance will help to protect you in this scenario.
GAP insurance - what should you watch out for?
The five key things to look out for are: length of cover, excess, any exclusions, claims process and cancellation process.
If one policy looks far cheaper than the others, check that the cover isn’t restricted by a very short limited claim period. For example, there are some that prevent you from claiming if your car is stolen and not recovered within a period of as little as 30 days.
Pre-approval is something to watch out for, too. It stops you from accepting an offer from the car’s main insurer without the consent of the GAP insurer, and could be used by the GAP company to delay its payout to you by repeatedly rejecting the insurer’s offers.
Why did the FCA stop dealers selling GAP insurance?
In February 2024, the FCA requested that all car dealerships pause the sale of GAP insurance over fears that they were not offering fair value to customers. In a previous What Car? study, we found that many car dealers were charging more than double what insurance providers quoted before sales were suspended.
According to the FCA’s data, only 6% of the amount customers pay in premiums for GAP insurance is paid out in claims. However, some insurers have paid out up to 70% of the value of premiums in commission to those selling the cover, such such as motor dealerships.
While dealers have been allowed to recommence GAP insurance sales since May 2024, fewer are promoting cover to customers looking to buy a car. According to a study by the warranty firm Intelligent Motoring, just one in 10 UK dealerships is now advertising GAP products.
Although this may be bad news for car dealers, it’s good news for consumers because they’ll still be able to buy cover that’s better value directly from online providers.
What Car? says…
What Car? content editor, Jack Mortimer says, “The FCA’s restrictions on dealers could leave you feeling that all forms of GAP insurance are overpriced. In reality, GAP can be an extremely worthwhile purchase, providing peace of mind if ever your car gets written off.
“Nevertheless, GAP insurance isn’t a one-size-fits-all purchase. If you’re financing or leasing a car, or you’ve chosen a model with heavy depreciation, GAP can be a very useful investment. If you do decide to get cover, it’s best to call providers (or, as I found out, wait for them to call you). Many will offer exclusive promotions over the phone to lower the cost, making it an even more worthwhile investment.”
