Why GAP insurance is a good idea

Guaranteed Asset Protection insurance (GAP) offers to cover the shortfall between the market value of your vehicle at the time of a total loss and the original amount paid for the car, or the outstanding finance loan balance if this is higher.

Your car getting written off can be a stressful time, you may be without suitable transport and the added financial strain of a shortfall on your vehicle can greatly impact your life. GAP insurance ensure that you can afford a suitable replacement vehicle, without losing out to depreciation, which can be thousands of pounds within the first few months.

This article will cover whether GAP coverage is worth it for you and your vehicle, what the current awareness surrounding GAP insurance is and finally, we will cover some common misconceptions surrounding GAP insurance policies and pricing, so you can completely understand how GAP insurance can benefit you.

*with the payout by their comprehensive insurance company after a total loss (YouGov, 2022).

** Based on the average cost of buying a new city car and the average comprehensive insurance payout after a total loss (YouGov, 2022).

GAP insurance helps to protect you from a finance gap in the event of a total loss. You may think that the risk of a total loss is low, however, a vehicle is declared a total loss every 90 seconds in the UK and 12% of UK adults have reported that their car was written off or stolen in the past five years (YouGov, 2022). Your comprehensive motor insurance company may pay out at the value of your vehicle at the time of the total loss. However, only 17% of UK motorists reported being able to afford a replacement vehicle, on a like for like basis, using the insurance payout alone. Furthermore, 57% are left unable to afford a replacement vehicle at all.

So, not even your comprehensive car insurer can be guaranteed to cover the cost of a suitable replacement vehicle after a total loss. Worryingly, the majority of motorists couldn’t even afford to buy a new car even after receiving a payout by their comprehensive insurance company after a total loss (YouGov, 2022).

Attitudes towards GAP insurance

Unlike car insurance, GAP insurance is not a legal requirement on UK roads. The majority of UK motorists have heard of GAP insurance; however, most do not have it. In fact, only 23% of vehicles that were written off had GAP coverage, this leaves over three quarters of UK motorists with a potentially large financial shortfall when purchasing a new vehicle (YouGov 2022). It is estimated that the total loss cost to UK motorists was £8.4 billion in the last 5 years.

GAP insurance misconceptions

UK motorists pay an average of £412 per year for comprehensive car insurance cover, and this may not even cover a replacement vehicle in the event of a total loss, so why is GAP insurance relatively uncommon? The reason that most UK adults do not protect themselves with GAP insurance may be due to some common misconceptions about GAP insurance, including high premiums, limited cover, and eligibility.

GAP insurance is expensive – many people assume that GAP insurance is expensive because it covers a large financial shortfall between comprehensive insurance payout (£4,270) and the average cost of a new vehicle (£13,600 for the average city car). However, the average cost of a three-year GAP policy is only £5 per month compared to £35 per month for comprehensive car insurance.
GAP insurance doesn’t cover vehicle theft – GAP insurance will cover the finance gap in almost any circumstance, including accidental damage, fire, flood, and theft.
You can only purchase GAP insurance from your car dealer – Your car dealership may offer GAP insurance, however, going to an independent GAP insurance provider will ensure that you get the best rate on your premium.
There is only one type of GAP insurance – Back to Invoice GAP insurance is typical, however it’s common for a GAP insurer to offer a range of policies tailored to different vehicle purchase options, including, Personal Contract Purchase, Contract Hire purchase or Finance lease. You can be completely covered regardless of how you paid for your car.
You can only get GAP insurance on car finance – GAP insurance can cover the original amount that your vehicle was worth in addition to the amount that you owe on car finance. However, you do not need to have paid for your car on finance to gain the benefits of GAP insurance.
You can only get GAP insurance on new cars – GAP insurance on new cars may be preferred since depreciation is the highest when the car is new, however, it is still possible to get GAP insurance on eligible used and pre-registered cars.
Comprehensive insurance coverage already offers this – Your comprehensive motor insurer may cover the cost of your vehicle at the time of the total loss; however, this does not account for depreciation or the outstanding finance on your car. GAP insurance coverage avoids this shortfall.

GAP insurance with ALA

There are now multiple options of GAP insurance policies that are available to cover a range of vehicle owners. ALA offers four different types of GAP insurance including:

Back to Invoice Plus – this type of GAP insurance will cover the shortfall between your comprehensive auto insurance payout and the amount you originally paid for your vehicle including any outstanding finance.
Vehicle Replacement Plus – this type of GAP insurance will cover the shortfall between your comprehensive auto insurance payout and the cost of a replacement (even if the price is higher than you originally paid).
Contract Hire Plus – this type of GAP insurance will cover the shortfall between the comprehensive auto insurance payout and the owed lease payments on the vehicle.
Agreed Value GAP Insurance – this type of GAP insurance will cover the shortfall between the comprehensive car insurance payout and the market value of your vehicle at the time of purchasing GAP insurance (according to the Glass’s Guide).

ALA offers great value GAP insurance; our average three-year insurance policy will cost only £5 per month, and we can cover vehicles up to the value of £150,000. Finally, ALA will pay the maximum shortfall if your comprehensive insurance company agrees to pay out. Get a GAP insurance quote from ALA today.

GAP Insurance for over 35 Manufacturers including Audi, BMW and Land Rover

Common queries

When should you get GAP insurance?

GAP insurance is best suited to those who have bought a new car and/or the amount their loan balance is greater than the value of their car. You may also want to get GAP insurance on your new or pre-registered car if you want to protect yourself from depreciation in the event of a total loss.

How many years do you need GAP insurance?

Cars depreciate the fastest in the first years of ownership, in fact, your new car may depreciate by 20% as it leaves the dealership and a further 20% after the first year. Additionally, for a car bought on finance, the loan balance may be higher than the current market value of the car – owing to depreciation within the first few years. For these reasons, GAP insurers offer finance gap coverage for these first 3-4 years and GAP policies are rarely renewable.