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GAP Insurance | Your complete guide

Updated 11th January 2024


Gap Insurance protects you against financial loss. This can happen if your vehicle is stolen or declared a 'write-off' by a motor insurer. It can top up your motor insurer's settlement. This can be back to the original price paid for your vehicle, its replacement cost, or to clear a finance agreement.

In this guide

What is GAP Insurance?

Simply put, GAP Insurance (or Guaranteed Asset Protection) can provide added financial protection. This comes into play if your vehicle is written off by your car insurer following

  • accident (fault or non-fault)

  • theft (recovered or not)

  • flood

  • fire

Why Gap Insurance exists


Deciding that you need Gap Insurance (Or Guaranteed Asset Protection as it is also known) comes down to a few factors:

  • The vehicle you buy will lose value over time.

  • The vehicle may have an accident, fire, flood or get stolen. If this happens, your car insurance provider can 'write off' the vehicle as an uneconomic total loss. You can claim on a fully comprehensive car insurance policy as the vehicle is written off or stolen. But, this claim may only pay the market value of the car.

  • A market value settlement from your car insurance may not be enough to give you back what you paid for the car. It may also not be enough to clear the financial liability on a lease or HP agreement left on it.

This is where GAP Insurance can step in.

The average new vehicle can lose up to 60% of its value within the first three years of ownership in the UK. - Source The AA

How GAP Insurance works

Let us say you have paid £20,000 for your brand new car. Three years later your car is written off or stolen and declared a total loss (aka write off) by your car insurance company. Your car insurance may only cover the value of the car then, not what you first paid for the car. If it has lost 60% in that time, you would only receive £8,000 as a 'market value' settlement.


What would you do? Your vehicle has now gone. All you may have is £8,000 current market value settlement to replace it. What if you also have car finance outstanding on the vehicle?


Key requirements for Gap Insurance to work

  • You must have a fully comprehensive motor or car insurance policy in place for the vehicle from a UK registered car insurance provider

  • Your motor insurance must write off the vehicle as an uneconomic repair or total loss

  • Your motor insurance MUST NOT repair or replace the vehicle

  • Your motor insurance MUST pay out the market value of the car at the time of the claim


Find out more about when GAP Insurance does not pay out.


Buying Gap Insurance cover - time limits for purchase

There are time limits, from the time you get the vehicle, that you can buy gap insurance. This varies from provider to provider, anywhere from a 30 day to a 180-day time frame. Outside these periods the choices for cover are more restricted. You can purchase GAP Insurance products for between 2 and 5 years, in the case of Total Loss Gap.


Please note, the maximum term of cover our insurance company will allow is for 5 years of your vehicle ownership. This means that if you buy a 5-year policy 180 days after the vehicle purchase, then the insurer will only cover you until the fifth anniversary of your ownership (in this example, roughly after 4 and a half years of the policy term). However, if you transfer the cover to a new vehicle then the policy will run for the full term on that vehicle, as you will not own it for more than 5 years. 



Types of Gap Insurance cover - VRI, RTI, Finance Gap Insurance and Lease/Contract Hire

There are many types of gap insurance policies in the market. These include:

Finance Gap Insurance


Suitable for


Not suitable for

  • Purchases via a personal or bank loan

  • Purchases from a private sale, auction, eBay etc

This is the basic type of Gap Insurance and can be limiting. There are different types of Gap Insurance that may be more suitable.


Finance Gap Insurance (aka Shortfall) is for 'linked' vehicle loans. It covers the difference if the car is written off, between the car insurers' settlement and the finance settlement.

Personal and bank loans may not be against the vehicle, they are against the borrower. HP or PCP agreements need to have the finance paid off if the vehicle is a write-off. This is not the case with personal or bank loans.

Return to Invoice Gap Insurance

Suitable for

  • Purchases from a VAT registered motor dealer

  • Vehicle purchased outright (cash), HP, PCP or bank loan

Not suitable for

  • Vehicles bought by private sale, auction, eBay etc

Return to Invoice is often the type of Gap protection a motor dealer will offer. It covers from the motor insurers 'write off' value to what you originally paid for your car, ie the invoice price. Often the Return to Invoice Gap (or Back to Invoice Gap Insurance) can be 'combined'. This means if the finance amount is higher than the invoice price then the finance gets paid instead.

Vehicle Replacement Gap Insurance

Suitable for

  • Purchases from a VAT registered motor dealer

  • Vehicle purchased outright (cash), HP, PCP or bank loan

Not suitable for

  • Vehicles bought by private sale, auction, eBay, etc

Vehicle Replacement Gap Insurance is considered the highest of all types of Gap Insurance policy available. It can cover you between the comprehensive car insurance settlement and the cost of the replacement vehicle. The replacement vehicle would be the same as yours when you first bought it. For example, if you bought a brand new vehicle then it is the cost of a new car at the time you claim. If it was 2 years old with 20,000 miles then the equivalent is a 2-year-old, 20,000 miles example at the time you claim with Vehicle Replacement.

Contract Hire & Lease Hire Gap Insurance

Suitable for

  • Vehicles secured on a lease with no option to own

  • Vehicles secured via a leasing broker or motor dealer

Not suitable for

  • Vehicles purchased by cash, HP, PCP, bank or personal loan

  • Vehicles purchased privately, via auction, eBay, etc

If you have taken a vehicle on a lease or contract hire agreement this is the best type of Gap Insurance for you.


As you cannot own the vehicle you can't protect either the invoice paid fro your car or the replacement cost. You don't need to either. Instead, this form of cover will protect any shortfall owing to the lease company in the event of a total loss. If the vehicle is a written off or stolen, your car insurer will pay the value of the vehicle at that time. The leasing company will then ask you to settle the lease in full.

This settlement can include:

  • The outstanding rentals on the lease.

  • The residual value of the vehicle.

The car insurance settlement may not cover the entire lease settlement. Lease/Contract Hire Gap Insurance can pay any shortfall.


Deposit Protection option with Lease/Contract Hire Gap Insurance 


Often a lease is in the form of an 'advanced' rental, followed by monthly rentals for a fixed term. The 'advanced' rental is like a deposit and can be 3, 6 or 9 monthly rentals combined as a first payment. With 'deposit protection' you can protect your initial advanced or deposit rental. This means you can claim back your 'deposit' rental and use this as a deposit on your next vehicle. This is in addition to the standard Lease/Contract Hire Gap policy.

Agreed Value / Return to Value Gap Insurance

Suitable for

  • Vehicles owned for more than 180 days (or the max period to buy VRI or RTI)

  • Vehicles purchased privately


Not suitable for

  • Vehicles on a lease/contract hire agreement

Agreed Value Gap Insurance covers from the car insurers payment to the vehicle value when you buy the Agreed Value policy. So the value covered is set at the time of buying Agreed Value, not what you paid for your car. The Agreed Value is set by referencing one of the motor industry guides, such as Glass Guide. Check the Agreed Value Gap product you are looking at to see which guide they would use.


Typical Features of Gap Insurance cover - what you can expect to find covered

  • Excess Contribution - Pays towards the excess taken by your car insurer from a ‘write off’ claim. Gap Insurance often contributes towards this deduction, if you claim. This may be between £250 and £750 depending on the product provider.

  • Claim Limit - You may have to select an upper claim limit for your policy. This is the most you will ever be able to claim from your Gap Insurance policy. You have to make sure it covers you for the type of policy and period you select. Some products carry an 'unlimited' claim limit so no judgment needed.

  • Combined cover - This means at least two types of Gap Insurance rolled into one. Often this is Finance Gap Insurance and Return to Invoice Gap as a 'Combined RTI'. This means you are covered to the higher of the financial settlement or the original price paid.

  • Accessories cover - Normally all factory fitted extras are included with policy terms. Some products also cover dealer fitted accessories, often capped at £1500 total value. If you have bought dealer accessories check if they are excluded. Extras like paint and fabric protection costs can be covered, but not by all products.

  • Transfer of policy - If you change the vehicle mid-term then you can often transfer the Gap Insurance to your new vehicle. If the new vehicle is more expensive (i.e. higher risk) then you might need a new Gap policy.

  • Cancellation & Refund - If you dispose of the vehicle before the policy ends then you can cancel. Any refund amount calculation will be in the policy terms. If you claim on the policy then you cannot claim a refund.

Typical Gap Insurance exclusions - What is not covered?

  • Motor Insurer 'Indemnity' - You must have fully comprehensive car insurance in place. If your fully comprehensive car insurance lapses, is only 'third party' or does not cover you for the claim then Gap Insurance is not valid.

BE CAREFUL not to allow someone to borrow your car using their fully comprehensive car insurance. Even though they may be 'fully comp' on their own car they may only be 'third party' on yours! (For more about how Car Insurance works with GAP Insurance click here)

  • Commercial use - If you are using a vehicle for a taxi, courier, chauffeur, driving school then check t's & c's. Most standard Gap Insurance will exclude these uses. Specialist alternatives do exist.

  • Negative equity cover - If you owe more on a finance agreement than your car insurer pays then that is normally covered. But if you had a part-ex with finance owing and this can be added to the finance agreement on the new car. This 'negative equity' is not covered in most policies. Specialist add-on options may be available. (See 'Does GAP Insurance cover negative equity' for more details).


Should you get Gap Insurance cover?

Why buy Gap Insurance? These facts may help you decide whether a policy is worth it for you, or not.

  • Vehicles lose value. If the car insurer 'writes off' the vehicle as a total loss then you may only get the market value at that time.

  • If you have finance linked to the vehicle (on a lease, HP or PCP) then the motor insurers settlement may not clear it.

  • Vehicle thefts rose by over 50% in the last 4 years - (Easy Gap)

  • On average a vehicle is written off every 90 seconds in the UK (according to Churchill).

  • 1 in 83 drivers has their vehicle written off each year in the UK.

  • 89,000 vehicles a year are stolen in the UK (according to the Daily Express).



Why get Gap Insurance cover for new cars?  

There is an argument that it is more useful for brand-new cars or vehicles. This is because new cars lose value much quicker than a used car. It is common that a new car will lose at least 50-60% of its original price in 3 years. Whatcar? reported some new vehicles losing more than 80% in the first 3 years. A depreciating value means a growing potential claim on a Gap Insurance policy if the vehicle is written off.

Have you got 'new for old' replacement cover on your car insurance?

Some car insurance cover provides 'new for old' cover for 1 or even 2 years on new cars. This means that if the new car is written off then the car insurer will replace the vehicle for you. This means you may not need Gap Insurance, right?

The issue in relying on 'new for old' comes as there can be some restrictive terms and conditions attached. The motor insurer may not allow the 'new for old' option for a number of reasons including;

  • You are not the registered (and/or) first keeper or owner. This can be the case on a lease

  • The vehicle is subject to a finance agreement

  • The insurer cannot replace the vehicle within a set time frame

  • There may be maximum mileage clause e.g. no more than 10,000 miles at point of claim

Any of these reasons, and more, can mean your car insurance only paying the market value in the claim. If you have no Gap cover you have no option to claim any shortfall. You must be sure that you are happy with the insurer's terms if you are to rely on them. But if you are happy with your 'new for old' cover then you don't need Gap Insurance in that time, do you?

That may be the case but if you do want cover for years 2,3,4 and perhaps 5 then what do you do? There is a temptation to delay taking out a policy until the end of year 1 but there is an issue with that. You MUST buy a Gap Insurance policy within a set time of buying the vehicle, often 180 days (about 6 months). If you leave it until the first year is up then you may not be able to buy protection at all, or you may see options reduced. The solution may be to find a Gap Insurance provider who will allow you to defer your policy start date. This means you can buy the cover within 180 days of vehicle purchase, just setting the 'start date' in the future. The normal maximum start date you can set is 1 year after the vehicle is first registered new.


For more on Deferred Gap Insurance see our guide to Total Loss Gap 365

Why buy Gap Insurance cover for used cars?

Some of the reasons for getting Guaranteed Asset Protection on a brand new car are also valid when thinking about the Gap Insurance cover on a used car too. All vehicles, new or used, will lose value and this can be covered with Asset Protection. However, as we pointed out above, used cars tend to lose value at a much lower rate. Accepting a used vehicle will lose value at a lower rate than a new one, it will still lose value. If a new vehicle at £20,000 loses 50% of its value in 3 years then that is a potential £10,000 'Gap'. If a used vehicle at £15,000 only loses 33% over 3 years then that is still a £5,000 'Gap'. So any claim benefit on a used car might well be lower than against a brand new car. That does not tell the whole story though.

Claims data from our insurers show that the frequency on used cars is now higher. That means the rate at which claims are made. To a customer that means the chances of you making a claim on a used car are rising. Why might that be?

  • repair costs are rising - increased safety tech like airbags, cameras, and sensors in crash sensitive areas
  • bodyshop capacity is falling in the UK - pushing up the cost of repairs
  • If you have a crash in a new car of £20,000 value then £10,000 worth of damage may see the vehicle repaired.
  • If the very same damage was done to a used car of £12,000 value then the used car may end up being written off.
  • The salvage value of the vehicle can also be high these days. The second-hand value of the parts of the vehicle can be high.
  • The cost of leaving you in a hire car whilst your vehicle is being repaired also adds to the overall claim costs.

Putting all these factors together you may see that motor insurers may be more inclined to write off a vehicle than ever before. Of course, these factors apply to new vehicles also. But a used car, with a lower value, may be more likely to trigger the insurer to write off the vehicle.

How to buy a Gap policy

If you are looking at buying Gap Insurance then there are many ways you can do this.

Motor dealers

This is often where you are first introduced to Gap Insurance. During the process of buying the car, the dealer may offer cover along with other 'add-on' products. There are some known issues with buying Gap Insurance from the motor dealer, including:


The Price - why is Gap Insurance so expensive at a dealer?

The average cost of Gap Insurance at motor dealers can be £300-£400. Compare that to online prices at £150-£200 then that can be quite a significant difference. Why is this?

  • Scale - Individual dealers may sell a small number of policies (they can only sell to their own customers). Because of this, they may have to source their products through an intermediary. This could be a finance house or manufacturer.

  • Added Commission - extra commission can be paid to the salesperson or finance manager.

  • Insurance Premium Tax - there are two rates at which you can pay tax on insurance in the UK. The standard rate of IPT is 12% (as you would pay for car insurance or travel insurance, for example). If you buy a policy from a company involved in the sale of the vehicle (ie the dealer) you pay a higher rate of IPT at 20%.


Other issues include

Limited range of products to offer

Often motor dealers can only offer the basic Gap shortfall protection or 'mid-range' RTI. Few offer full Vehicle Replacement Insurance, which can be beneficial on some deals.

Pushy sales tactics

Some consumers have seen 'pushy' sales tactics in dealers with 'add-on' sales in the past. The dealers are aware that you can find equal, or better Gap products elsewhere at a cheaper price. New rules came into force on 1st September 2015 from the Financial Conduct Authority. These aimed to reduce the dealers 'point of sale' advantage when selling these types of products. Dealers are now not allowed to sell additional insurance products at the same time as selling you the car. The dealer must provide full product details and the price. They then must allow 2 days for consumers to consider their options and compare the market.

Motor Insurers

Now you may think that Gap Insurance cover and motor insurance go 'hand in hand'. In fact, few of the main motor insurers offer Gap protection at all. One we have seen starting to offer cover is Admiral, through Car Care Plan. The products offered appears limited to a version of Return to Invoice or Agreed Value style. Comparison websites like Go Compare, MoneySupermarket and do offer guides, alongside car insurance.


Independent, specialist insurance brokers have been selling Gap Insurance for many years. Indeed our company, Aequitas Automotive Ltd, has sold Gap Insurance from the following brands:

Of course, there are some other insurance brokers around who also sell these types of cover. We just think we are one of the best! The advantages of buying from a broker can include:

Premium Price

Insurance brokers can work on a small commission/large volume basis. This means they often provide comparable cover to dealers but at much lower premiums.


A range of Gap products

Not all vehicle purchases are the same. Having a range of products available can mean you get a tailored solution.


Can offer cover from more than one insurer

Again different insurers can offer a different feature set on each type of cover. Different costs too. A broker can often provide you with alternative quotes that can give you the best value.


Finance Company

You can find some motor dealers do not sell cover directly. Instead one of their supporting car finance houses may contact customers on their behalf. This may mean a direct telephone call to discuss options for Gap Insurance. The range of product options is again an issue. Finance companies can be keen to offer basic finance shortfall cover. It may not be the best option even with finance agreements in place.


Gap Insurance Discount Codes

In the modern world online the lure of a voucher or discount code appealing. Who wouldn't want to save money? The issue with using discount codes is that you can still find an equal, or better cover, at a lower price elsewhere. Don't forget about policy features either. Just because one provider offers a discount make sure the policy features are what you need also. In saving a few pounds you might have cost yourself thousands in getting a lesser cover.


Gap Insurance Reviews

There are many good, industry recognised consumer reviews available. The Money Saving Expert review is often cited, as well as one of the long-standing reports from Which? Both of these appear to provide unbiased reviews and information (although we may not agree with everything they say!). They are both are authorised and regulated by the Financial Conduct Authority (FCA).

How are you protected? - what can do you when things go wrong

What happens if the company who sold you the Gap policy goes bust?

You will buy the cover from a 'retailer'. This could be the motor dealer, the insurance broker or the finance company. If they close down then the policy is still underwritten by an insurer. They will have a full claims procedure and team in place to deal with you. The contact details will be in the policy terms. In reality, the 'retailer' will have little to do with a claim (certainly if it as the motor dealer who sold you the policy). What happens is the insurer goes bust?

This is a bit more of a concern. Insurers are subject to 'solvency' requirements but they can still run into trouble. If you buy insurance in the UK then you can be covered by the Financial Services Compensation Scheme. The FSCS can cover up to 90% of your claim for non-compulsory insurance (like Gap). There are some limitations for commercial customers. Check with the FSCS for limits on the cover.


What happens if you are not happy with the outcome of a claim?

The policy terms and conditions will have a complaints procedure laid out. This may involve making a complaint to the 'retailer' (in writing or by email address) if you are unhappy about how you were sold the policy. If your issue was with the claim then you can complain to the insurer. If you are unhappy with the outcome of the complaint then you can go to the Financial Ombudsman Service.