"Hi, my name is Simon England, MD of ALA Insurance Brokers.
So, what is GAP Insurance?
Let me give you an example: you buy a car 6 months ago for £20k, 6 months later that car, for whatever reason, is declared a total loss. Your fully comprehensive insurance provider is going to pay you the market value which is, say, £15k.
You then approach the finance company who you bought the car through and once they’ve applied their finance charges on the amounts still owing, you find that you owe them £18k – so without a GAP Insurance policy you are going to lose your car, going to have to settle the finance off and end up with another bill for £3K
Take another scenario: same car – same value – same period of time it’s written off: but you own the car outright – you bought it for £20k and it’s worth £15k so to get yourself back into the car you had before you’re going to have to find another £5k.
As time goes on, GAP Insurance will pay back to the invoice price of the car on finance, so if in 2 years time it gets written off, it’s worth 10k – the GAP Insurance will pay you back to the invoice price of 20k by paying you the 10k required."