GAP insurance: what it covers

In the event your vehicle is written off due to an accident, theft, fire or storm damage, your comprehensive motor insurer may only settle for the vehicle’s current market value at the time you make your insurance claim.

Your new car will begin to depreciate in value as soon as you start to use it. Unfortunately, depreciation rates don’t account for any outstanding finance costs you have on your vehicle when you make your insurance claim. This means that you could be left seriously out of pocket if your motor insurance settlement is significantly lower than what you originally paid for your car or what you owe to your finance company.

Thankfully, there’s a solution to this frustration in the form of guaranteed asset protection (GAP) insurance. In this guide, we’re going to look at what is covered on a GAP insurance policy and help you understand which type of policy would be best for you.

What is covered in a GAP insurance policy?

GAP insurance will help to cover the difference between your motor insurance settlement and the price you originally paid for the car. It works alongside your comprehensive insurance coverage to provide you with more robust protection for your vehicle.

In order to be eligible for a GAP policy, the insured vehicle must be a private car/passenger vehicle or light commercial vehicle that is registered in the United Kingdom and does not exceed 3.5 tonnes in weight. As well as protection in the event your vehicle is stolen or written off due to an accident or fire/storm damage, GAP coverage will extend to any unforeseen events in which your vehicle is deemed to be a total loss by your motor insurer.

There are some notable exclusions to GAP insurance coverage, including grey imports and any left-hand drive. Find out more about what is not covered by GAP insurance in this expert guide.

What is included in a GAP insurance quote?

Vehicle invoice price

The original invoice cost of the vehicle you want to insure will form the basis of your GAP insurance premium However, this will not include any dealer or manufacturer discounts, interest or delivery charges, road fund licence, fuel, service plan costs, arrears or negative equity.

Level of cover

Your level of cover refers to the maximum amount your GAP insurer will pay if you make a claim. The claim limit mostly defaults to full vehicle value or £50k if the car has an invoice price of more than £50k.

Term of cover

Ideally, you should match your policy term to the number of years you intend to keep your vehicle. Even if you don’t know for sure how long you’ll be keeping your car, don’t risk taking short-term cover. Most types of GAP insurance have policies that last for three to four years, reflecting the average duration of vehicle ownership. It’s also worth bearing in mind that you cannot repurchase, extend or renew your GAP insurance policy once the original term has expired.

Excess contribution

ALA GAP insurance cover extends an excess contribution capped at £250 towards your comprehensive car policy.

Additional covers

To boost the protection for your vehicle, you could also opt for extra covers such as Scratch & Dent Insurance, Tyre and Alloy Wheel Insurance, Excess Cover and Keycare for an additional premium.

Choosing the right GAP insurance for you

While it’s an excellent idea to boost your vehicle’s level of cover, GAP insurance isn’t a legal requirement and isn’t always necessary.

GAP insurance is particularly useful for new vehicles that will depreciate in value more quickly than used vehicles in the first few years of ownership. However, remember that some motor insurance providers will provide you with a new car if yours is declared a total loss within the first year of ownership. In this case, GAP insurance wouldn’t be as beneficial but you could transfer the remaining cover on your GAP policy over to your replacement car.

With this in mind, the types of GAP insurance you should consider are:

  • Back to Invoice Plus: Also known as Return to Invoice Plus, this policy type will pay the difference between your motor insurer’s market value settlement and your vehicle’s original invoice price or the outstanding rental on your finance agreement (whichever is higher at the time of your claim).

  • Agreed Value: This is for vehicles bought from private sellers or outside the time restrictions for other GAP policies. This cover is based on the Glass’s Guide value of the vehicle when the GAP cover starts

  • Vehicle Replacement Plus: Cover on this type of policy will pay the difference between your motor insurer’s settlement figure and the replacement cost equivalent to the vehicle as it was originally priced, not at the time of the write-off, or your outstanding finance, whichever is higher.

  • Contract Hire Plus: This policy will settle up to 100% of your outstanding rental payments on a lease or contract hire vehicle. It will also cover any shortfall in the market value settlement provided by your comprehensive motor insurer. Also, you can opt to cover your initial rental payment up to £3,000

GAP insurance with ALA

Whether you bought your vehicle through a cash payment, personal loan, lease/contract hire agreement or finance agreement, a GAP insurance policy from ALA can be completely tailored to suit you.

We are fully authorised and regulated by the Financial Conduct Authority and our policies are covered under the Financial Services Compensation Scheme. We offer pro-rata transfers of unused premiums with no admin fees and a 120-day limit for making claims instead of the standard 30 days. For more information about GAP insurance or to discuss your policy options, contact a member of our team.