What is GAP insurance?

If you’re buying a car, you might have been offered GAP insurance, or GAP cover. We talk to insurance expert Michael Brown, National Insurance Sales Manager for On Insurance, about what GAP insurance entails.

What is GAP insurance?

“GAP insurance stands for Guaranteed Asset Protection insurance. In the event that a vehicle is declared a total loss by the main motor insurer, the insurance will pay out the difference between market value of the vehicle at the point of total loss, and the purchase price of the vehicle. Without GAP insurance, the insurer will only offer the current market value of the vehicle in the event of a total loss. This may well be below the purchase price of the vehicle, or whatever is outstanding on the financial agreement.”

Do I need GAP insurance?

“There are a number of different types of GAP insurance on the market. The most popular is a combined valuation policy. This will cover any amounts outstanding under a finance, lease or contract hire agreement, and cover purchase price. Motor vehicles can depreciate quickly – almost as soon as they leave the showroom. On average, new cars lose a total of 60 per cent after only three years. Invariably, the amount outstanding on finance after a total loss will exceed the total loss offer made by your insurer, leaving you to come up with a lump some to pay off the finance. Investing in GAP insurance can be a good way to avoid this eventuality.”

Where can I get GAP insurance?

“Currently, GAP insurance can be purchased through an insurer, or from your motor dealer at the point of sale. However, The Financial Conduct Authority has ruled that from September 2015, dealers cannot sell GAP cover to clients at the point of sale – they must wait a minimum of four days before selling a product to a client. This is to ensure that you are aware that you can purchase your GAP cover elsewhere, and to give you the chance to shop around.”

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