GAP insurance explained: when your motor insurer's payout is not enough
GAP (Guaranteed Asset Protection) insurance covers the difference between what your motor insurer pays after a write-off or theft and what you actually owe or paid. For financed vehicles and new cars, this gap can be thousands of pounds. This article explains when GAP is worth buying and when it is not.
Why the "gap" exists
When a motor insurer settles a total loss (write-off or theft), they pay the actual cash value of the vehicle — what it was worth in the market at the time of the loss. This is almost always less than what you paid for it, and potentially less than what you owe on finance.
Worked example
GAP insurance pays the £2,500 difference, leaving you debt-free after the write-off.
Types of GAP insurance
Finance / loan GAP
Pays the difference between the motor insurer's settlement and your outstanding finance balance. The most common type. Best when you have significant finance remaining.
Return-to-invoice (RTI)
Pays the difference between the settlement and the original invoice price. Better if you have paid down much of the finance and the outstanding balance is low.
Vehicle replacement GAP
Pays enough to buy a new equivalent model at current prices — the most comprehensive and most expensive type. Useful if new car prices have risen since you bought.
Agreed value GAP
Pays a fixed agreed value rather than a calculated sum. Less common, typically used for classic or modified vehicles where market value is harder to assess.
For context on how total loss is handled by your main motor insurer, see our article on motor total loss. For a GAP buying guide, see our GAP insurance guide.
GAP insurance FAQ
Frequently asked questions
- For a new car purchased outright or on finance, GAP insurance is often worth the relatively modest premium in the first 2–3 years of ownership. New cars depreciate significantly in the first year — 15–35% in year one is common. If the car is written off in year one, the motor insurer pays market value (say £22,000 on a £28,000 car). GAP insurance covers the £6,000 shortfall. After year 3–4, depreciation slows and the gap between market value and outstanding finance usually narrows to the point where GAP cover is less necessary.
- No. Standard comprehensive motor insurance pays the market value (actual cash value) of the vehicle at the time of the loss — not what you paid for it, not what you owe on finance. This is the fundamental gap that GAP insurance fills. See actual cash value for how market value is calculated at claim time.
- Independent GAP insurance is almost always cheaper than dealer-sold GAP cover. Dealer-sold GAP has historically attracted FCA scrutiny for high premiums and poor value. Under FCA rules, dealers must offer a 2-day deferral before GAP insurance is sold, giving consumers time to compare. Use that time: compare independent GAP providers against the dealer quote before deciding. The FCA publishes guidance on GAP insurance.
- Finance GAP (or loan GAP) pays the difference between your motor insurer's settlement and your outstanding finance balance — nothing more. Return-to-invoice (RTI) GAP pays the difference between your motor insurer's settlement and what you originally paid for the car — which may be more than the outstanding finance if you have made significant repayments. RTI gives better protection if you have paid down a significant portion of the loan.