Popular GAP Insurance Questions Answered

Answers to some of our most frequently asked questions.

Published: 23rd October 2017

GAP insurance is a beneficial insurance policy for anyone looking to buy a new or used car in the near future. However, it can often be overlooked by drivers due to a lack of understanding of what GAP insurance actually is.

To make things easy, we looked at some of the most commonly asked questions online surrounding the topic, such as ‘What is GAP insurance?’, ‘How much is GAP insurance?’ and more. Here we present the most popular questions and answers to make understanding GAP insurance simple.

What is GAP Insurance?

Guaranteed Asset Protection (GAP) insurance is a policy which covers the financial loss that can occur if your car is written off. While your car insurance will provide some financial protection if your car is deemed a total loss in the event of an accident, flood, fire damage or theft, it will only pay out the vehicle’s market value at the time of the write off. GAP insurance pays out the amount lost between what you originally paid for your car and what your insurer provides at the event of a write off.

What does GAP insurance cover?

GAP insurance covers the shortfall between the amount you paid for your car and the amount your insurer pays out in the event it is written off. Any named driver on your car insurance policy is covered by the GAP insurance policy, should they be behind the wheel when the worst happens. Generally, as long as your car insurer pays out, then GAP insurance will also cover the financial loss.

Can GAP insurance be transferred?

Yes. When applying for GAP insurance you are required to state the anticipated ownership length of time for your vehicle (up to five years). This can understandably be tricky and if you end up switching cars before the policy is up you may worry about it being a waste of money. With ALA Gap insurance, every policy includes pro rata transfer of unused premium if you change your car, with zero admin fees. This means you can simply transfer your policy across to your new vehicle.

How is GAP insurance calculated?

The GAP insurance pay out you receive is simply the difference between what your insurer pays out and what you paid for your car in the first place. For example, if you bought a brand new car for £40,000 but it gets written off in a flood three years later and your insurer pays out £20,000 as cover due to depreciation, the amount of GAP insurance you are paid will be £20,000.

In terms of calculating how much GAP insurance you need, this is calculated based on the original cost of your vehicle and length of ownership. The type of vehicle, whether it is new or used, bought outright, on finance or leased, will also affect it.

Will GAP Insurance Pay Off My Car?

Not on its own, but combined with your comprehensive car insurance, the full value of what you paid in the first place will be covered. Whether you fully own the car or are making repayments on finance, GAP insurance can be used to pay off your personal financial loss, the remainder of your lease agreement payments or the amount left to settle hire purchase or other finance terms.

When is GAP Insurance Required?

It is not a legal requirement but it is advisable for anyone buying a vehicle, though you must apply for GAP insurance with ALA within the first six months (180 days) of getting your vehicle (although this can be up to 365 days if you buy a brand new car and your insurer covers the full value for the first year). No matter how carefully you drive and take care of your vehicle, anyone can be a victim of theft, fire, flooding or an accident that was another driver’s fault and GAP insurance is required for any of these eventualities.
There are a few instances where GAP insurance with ALA cannot be used though:

  • Taxis
  • Driving tuition vehicle
  • Private or public rental car
  • Racing/rally/speed testing vehicle
  • Motorhomes or commercial vehicles weighing over 3,500kg

Who do I Speak to for a Claim on My GAP insurance?

With ALA it is one of our insurance partners who deal with any claims should your vehicle be written off. Either MB & G Insurance Services Limited for policies bought after 1st April 2014 or AMS Insurance Services Ltd for those before. If you require a transfer of unused premium when changing your car, you would instead contact someone from our friendly ALA team of administrators.

Hopefully these common questions and answers have helped make understanding GAP insurance a lot easier. If you still have more queries then check out more FAQs here surrounding GAP insurance.

Published: 23rd October 2017
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