GAP Insurance Coverage - What Is It?


"Hi, my name is Simon England, MD of ALA Insurance Brokers.

So, what is GAP Insurance? GAP Insurance fills the gap between your comprehensive insurers settlement value and one of two or three things: either getting you back to your original invoice price, clearing off any finance or perhaps replacing the car with either a new one or one of a similar age to that you originally bought.

Let me give you a scenario, you buy a car six months ago and the car for whatever reason gets written off and you paid £15,000 for it. Ok, so you get your comprehensive insurance settlement and that's £12,000 - so, if you own the car outright in order to get back in the car you had before you need to come up with another £3,000. With a GAP Insurance policy you don't because it will pay you back to the invoice price. If you have finance on the car you need to approach the finance company, they are going to come back to you with a settlement which once they've applied their finance charges to the amount of the loan outstanding means you may still owe them £14,000. On the basis you are getting £12k, you are going to have to come up with another £2k - with a GAP Insurance policy that won't be the case and that finance will get cleared off.

Now as time goes on, those differences are going to grow with regards the invoice price and market value. When you're looking at taking at a GAP Insurance policy you need to make sure the amount of GAP cover you're buying is going to be enough towards the end of the period and policy you're buying for to cover that difference between the market value and getting back to your invoice price, or indeed buying a new vehicle."

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