What Is GAP Insurance? Do I Need GAP Insurance?
Added: 22 March 2017
What is GAP insurance?
Did you know more than 80% of new cars are brought using a finance agreement such as PCP, HP or PCH? When you take out a finance agreement you will be asked do you want to take GAP insurance? If your car is stolen or written-off, your insurer will only pay market value for your car, what are you going to do with the remaining balance on the finance agreement which will be higher than what the insurance company will give you for your car?
GAP which is short for Guaranteed Asset Protection was created to cover the shortfall if your car is stolen or written-off, it works alongside your comprehensive car insurance policy.
What are the different types of GAP insurance?
There are various types of GAP insurance on the market, GAP insurance can be complex with various companies offering different products, let's run through them all.
Finance GAP insurance:
Finance GAP insurance will pay off any outstanding loans on your car if it's written-off.
Return to invoice GAP insurance (RTI) or Back to invoice:
Return to invoice GAP insurance or RTI for short will cover the shortfall between the claim payout from your car insurer and the amount you paid for your car. For example if you paid £15,000 for a car and the car was written-off, the insurer may give you £10,000, then GAP insurance would cover the difference, in this example £5,000.
Vehicle replacement GAP insurance:
Vehicle replacement GAP insurance will cover the shortfall between your car insurer payout and the cost of replacing your car with a brand new one, if the price to replace your car with a brand new car has risen due to the manufacturer putting their prices up, vehicle replacement GAP insurance will cover you.
Return to value GAP insurance (RTV):
Return to value GAP insurance covers the shortfall between the insurers payout and how much the car was worth when the policy was taken out. If your car was worth £10,000 when the policy was taken out, the car was then written-off and your insurer paid £8,000, then the GAP insurance would pay out £2,000. This can be useful if you bought the car second hand.
Lease GAP Insurance:
If you took out a lease agreement known as a PCH or BCH, lease GAP insurance will help pay the rest of your lease contract and any fees that may apply due to cancelling your lease agreement early.
Do I need to purchase GAP insurance?
GAP insurance is not mandatory unlike car insurance, but it can certainly save you a fortune if something unforeseen happens. If you used a finance agreement to buy your car then GAP insurance can prove very useful and would be highly recommend. If you are concerned about the depreciation of your car then again GAP insurance would be recommend.
Decided you want to purchase GAP insurance? Great, tell your sales executive that you want to purchase GAP insurance and they will be happy to answer all your questions.