What Is GAP Insurance? – GAP Car Insurance Guide

Guaranteed Asset Protection (GAP) Insurance is designed to settle the discrepancy between the finance amount owed on a vehicle and the payment an insurance company made if it is stolen or declared a total loss after a collision. The purpose of this type of insurance is to secure the car’s value.

GAP, then, is insurance to protect you from the money lost because of the difference in the amount paid for the car by the car insurance company and the amount owed for the personal loan to buy the car by the car finance company. For example, suppose you paid £15,000 to buy the car but it was then stolen.

The car insurance company has valued your car at £10,000 because you have had it for a while and put many thousands of miles on it. This leaves you with a shortfall of £5,000. If you have GAP insurance, it will pay you the £5,000.

Car GAP Insurance

This shortage arises because the insurer will not pay for the amount you paid for the vehicle. Instead, it will pay you based on their calculation of the depreciated value of your car. This depreciation value begins from the time you bought the car. It is estimated that a car will have depreciated by 10 percent to 25 percent of its purchase value as soon as it is driven away from the dealership. Over a period of 3 years, depreciation can be as much 60 percent of the original purchase value.

Why Buy GAP Insurance?

GAP Insurance, suitable for most car owners, should be taken out within 3 months after you buy a car. It also covers used cars less than 7 years old. It can be purchased after either a private or dealership sale and it is applicable even if the car is a private contract hire or car lease purchase.

Since this type of insurance is not compulsory, not required for the legal right to drive a car in the UK, few people have heard of it, and of those few who have heard about it, only a small proportion may have stopped to consider its benefits. Many believe erroneously that if they have fully comprehensive insurance and collision insurance, they don’t need any more insurance.

While, indeed, these two forms of insurance cover almost everything that could possibly happen to a car, they don’t cover how much the insurance company is willing to pay if the car is lost or written off after a collision. Most people are shocked after the loss assessor comes out to assess the damage to their car if it has been involved in a car accident and it is declared a “total loss.” This may be the first time they understand what depreciated value really means.

The insurance company will also have a host of other reasons why the car is not worth as much as the car owner thinks it should be worth. What can aggravate the situation even more is if the car has not been paid off in full to the finance company, leaving the car owner to pay off many thousands of pounds for something that they no can longer use.

What Are The Benefits Of GAP Insurance?

GAP insurance will bridge the difference between what you have paid for a car with what an insurance company is willing to pay you for it. If you financed the car, you may still be making payments on it. If you paid paid £15,000 to buy the car but only receive £10,000 from the car insurance company, GAP insurance will pay you the difference of £5,000.

Since this type of insurance is reasonably priced, it is worth while if you ever have to make a claim for a total loss or for a stolen vehicle. Between your car insurance and GAP insurance, you will be paid back what you spent on the car. GAP covers the negative equity, protecting t