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GAP insurance benefits: is it worth it for my vehicle?

If you have just bought a new or used car, you may be wondering whether GAP insurance is worth the money. Although a car insurance policy will protect you if your car is stolen or written off, you won’t usually receive what your car was worth when you first bought it, leading to a significant financial loss. GAP insurance covers the cost of this shortfall, so you won’t be out of pocket. But how does this apply to new, used and pre-registered vehicles?

In this guide, we will explain the various benefits of acquiring GAP insurance for your new, old or pre-reg vehicle, and the various types available for you.

GAP insurance for new cars

GAP insurance is a popular option for individuals who buy, lease or finance a brand-new car. Vehicles depreciate rapidly, and if your car is stolen or written off, you may lose out financially. There are four types of GAP insurance available for new cars:

  • Back to Invoice Plus: this policy will pay the difference between the market value settlement and the vehicle’s original purchase price or outstanding finance, depending on which is higher
  • Vehicle Replacement Plus: this policy covers the difference between the settlement your motor insurer has provided and the cost for a replacement equivalent vehicle or the outstanding balance of the finance agreement.
  • Contract Hire Plus: this policy applies to leased vehicles, and will settle up to 100% of your outstanding payments.
  • Agreed Value: if you purchased your car from a private seller rather than a motor dealer, or have had it for more than a year, this policy is for you

GAP insurance helps cover the financial shortfall if your car is written off and is affordable when compared to the amount that your vehicle will depreciate from the moment you buy it. GAP insurance policies are also flexible and can be tailored to your needs. However, there are exclusions from GAP insurance, including motorcycles, and you must have fully comprehensive cover with your motor insurer.

GAP insurance is highly recommended, especially for new cars, as they depreciate quickly within the first few years. To read more about the benefits of GAP insurance for new cars, you can read our full guide here.

GAP insurance for old cars

Although GAP insurance is recommended for new cars, used cars can still benefit from everything a policy has to offer. All policies except for Contract Hire Plus apply to used cars, as almost all leased cars are brand new.

Used car finance is becoming increasingly popular, as it is a more practical way for an individual to drive a relatively new car without paying a large sum outright. However, if your car is stolen or written off, you could owe more on finance than the car is worth at that time. GAP insurance will help bridge the difference between what you owe at the point of claim and what your insurance will be able to pay out.

Some second-hand cars are still incredibly expensive, so it is worth considering GAP insurance straight away, so you won’t be out of pocket. There are, however, some age limitations on which cars can qualify for a GAP insurance policy. For instance, for Vehicle Replacement Plus, the vehicle must be no older than seven years.

GAP insurance would be a valuable asset to have for used cars that are still relatively new, but you can always discuss your options with a member of our team. To find out more, you can read our previous guide here.

GAP insurance for pre-registered vehicles

A pre-registered car is a car that has never been owned by a customer but has instead been registered to a dealership or leasing company. Dealerships often do this to meet sales targets. Although pre-reg is usually cheaper than buying brand-new, pre-reg vehicles will still continue to depreciate.

All four GAP insurance policies can still apply to a pre-registered vehicle, but you can discuss your options carefully with a member of our team. GAP insurance can help you avoid paying a higher price for a replacement vehicle should your pre-reg car be stolen or written off. GAP insurance is also not as expensive as some may think. Depending on different factors, GAP insurance could only cost you around £20 a month for 10 months, although your coverage lasts for three years. If you want to pay monthly for three years, the average cost is just £5 a month.

However, there are limitations, like with any insurance claim. It will not cover damage that costs more to repair than what the vehicle is worth, and it will not cover you if your car was stolen due to negligence.

Like all cars, pre-reg vehicles depreciate, so getting a GAP insurance policy is always worth it. To find out more about GAP insurance for pre-registered vehicles, please read our full guide here.

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