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GAP insurance: what is Vehicle Replacement GAP insurance?

27 October 2023

Written by Simon England

|  5 Minutes

There are various types of GAP insurance suited to different people and their circumstances. The major deciding factor is how you funded your car and where you bought it from; for instance, cars bought with cash from a private seller will require a different policy to cars on a PCP car finance deal from a VAT-registered dealership. One of the most popular policies amongst drivers who have bought their car outright or with finance from a dealership is Vehicle Replacement.

In this guide, we will explain what is included in our Vehicle Replacement Plus policies, who the policy could benefit the most, and the various benefits associated with it. We will also highlight the differences between Vehicle Replacement Plus and Back to Invoice Plus, and how our policies can help you.

What is Vehicle Replacement GAP insurance?

Vehicle Replacement GAP insurance is a popular choice amongst drivers who would like the same make and model of their current car should it be written off or stolen. Our Vehicle Replacement Plus policies will cover the difference between your car insurance company’s settlement and the replacement cost of your vehicle as it was when you first bought it in terms of age and mileage. For example, a new car when purchased equals a new car following total loss with a Vehicle Replacement Plus policy. On the other hand, a car which is written off at 4 years old but was 2 years old when purchased, would be replaced with a 2-year-old car.

If you have a PCP (Personal Contract Purchase) or HP (Hire Purchase) agreement, we will cover the amount required to settle the finance if this is higher than the replacement cost at the time of your claim.

Vehicle Replacement Plus GAP (Guaranteed Asset Protection) insurance is suitable for anyone who is concerned about the cost of replacing their vehicle increasing over time; this policy will provide you with enough cover to fund a replacement vehicle of the same make, model, age, mileage and specification as the one originally purchased.

To qualify for a Vehicle Replacement GAP policy, the vehicle being insured can be worth up to £150,000, and it must be less than four months old and have fewer than 1500 miles on the clock if owned for less than 60 days. If the car has been owned for more than 60 days but fewer than 90, the vehicle can be worth up to £125,000, and it must be less than seven years old and have fewer than 80,000 miles on the clock.

To find out more about Vehicle Replacement Plus GAP insurance policies, you can visit us on our website here.

Who can Vehicle Replacement GAP insurance policies benefit?

Vehicle Replacement GAP insurance policies can benefit anyone who has recently bought their car from a VAT-registered dealership either for cash or using a finance agreement. We can top up the car insurer’s settlement to help you fund an equivalent car if yours is written off or stolen.

If you would like to discover whether you qualify for a Vehicle Replacement GAP insurance policy, you can get in touch with us here.

What are the benefits of Vehicle Replacement GAP insurance?

If your car is declared a total loss, your comprehensive car insurer is unlikely to pay out the amount you paid for the vehicle and, because of depreciation, you would be out of pocket. Vehicle Replacement will make up the difference between the car insurer’s settlement and the replacement cost of your vehicle, or it will cover up to the amount needed to clear your finance agreement if you have one and if this is higher at the time of the claim. This can save you from any financial losses related to the depreciation and write-off of your car, giving you peace of mind.

Vehicle Replacement is a great option as you can easily fund a replacement car that is equivalent to the one you have lost. If you bought the car on finance, not only will you be able to clear your debt to the finance company, but you will have enough money left over to put towards a new car.

If you would like to build a bespoke quote to see if you qualify for a Vehicle Replacement GAP insurance policy, you can start here.

Should I get Vehicle Replacement GAP insurance or Back to Invoice GAP insurance?

If you bought a car from a dealership and took out a PCP or HP finance agreement, you can choose between a Back to Invoice GAP insurance policy or Vehicle Replacement insurance. Both are similar in that they will make sure you’re financially protected in the event of a write off.

In terms of how they differ, Back to Invoice will cover the shortfall between your car insurer’s offer and the original invoice price whereas Vehicle Replacement will cover the difference up to the cost of a replacement vehicle. Both policies will pay up to the outstanding finance balance if this is higher at the time of claim. Both policies will pay the outstanding finance balance if this is higher at the time of claim.

Vehicle Replacement costs a little more than Back to Invoice due to the potential extra cover it provides. However, which policy works best for the driver depends on a number of factors. If the car was collected from a dealership more than 90 days ago, you will no longer qualify for vehicle Replacement Plus, but you can still choose a Back to Invoice Plus policy. Also, if the car is older than seven years but younger than ten, you can get a Back to Invoice Plus policy, but not a Vehicle Replacement one. Both policies cover cars worth up to £150,000.

How ALA can help

Our GAP insurance policies here at ALA are all competitively priced with features and benefits suited to all kinds of drivers. No matter which policy you choose, GAP insurance is designed to protect you from experiencing any financial losses should your car be written off or stolen. If you are too late to apply for Back to Invoice Plus or Vehicle Replacement Plus, you may still be able to obtain Agreed Value GAP insurance. However, please be aware the this is not going to cover your finance specifically.

To find out more, or to receive a bespoke quote, please get in touch with us here.

Common queries

Does GAP insurance cover the car or the driver?

GAP insurance is based on the comprehensive car insurance for that particular car, so if you have named drivers on this policy, they will be covered. This means if you add anyone as a named driver you don’t need to tell us!

When can you claim on your vehicle replacement GAP insurance?

If your car is declared a total loss (written off or stolen), you must first contact your car insurance company before getting in touch with your GAP insurance provider. If your motor insurer doesn’t pay out, then your GAP insurer won’t either. Thankfully this is rare, but it means you must make sure that any information you give to your motor insurer is accurate or they could refuse your claim.

Why would I choose Vehicle Replacement Plus over Back to Invoice Plus?

If the car was discounted (usually only applies with brand new) and particularly where it was a significant discount which might only be for a limited period of time, then someone may benefit from a Vehicle Replacement GAP policy. Also, Vehicle Replacement policies are great for anyone who is buying what they know to be an end-of-line or run out model, with a new one following in a few months’ time. However, a Vehicle Replacement policy is less beneficial on used cars as they are usually a lot more stable in terms of price, and if anything, they would potentially be cheaper.