Gap insurance is a financial safety net that many UK drivers overlook, but it can be incredibly valuable if your car is written off or stolen. It covers the “gap” between what your car insurance pays out and the original purchase price of your vehicle, or the outstanding finance amount. This article explores gap insurance options in the UK, helping you understand the different types of coverage and how to find the best car insurance companies that offer gap.
Understanding Gap Insurance
Gap insurance, short for Guaranteed Asset Protection insurance, is designed to protect you from financial loss if your car is declared a total loss. Standard car insurance typically covers the market value of your car at the time of the incident, which can be significantly less than what you originally paid, especially considering the rapid depreciation of vehicles.
For example, if you bought a car for £30,000 and it’s written off a year later when its market value is £20,000, your standard insurer will only pay £20,000. If you still owe £25,000 on your car loan, you’d be left with a £5,000 shortfall. Gap insurance bridges this gap, ensuring you’re not left out of pocket.
Why Gap Insurance Matters in the UK
Several factors make gap insurance a worthwhile consideration for UK drivers:
- Rapid Depreciation: Cars lose value quickly, particularly in the first few years. This depreciation can leave you with a significant shortfall if your car is written off.
- Finance and Leasing Risks: If you’re financing or leasing a car, you’re obligated to continue payments even if the car is no longer usable. Gap insurance protects you from paying for a car you can’t drive.
- Rising Claim Values: The average gap insurance payout has been steadily increasing, indicating a greater need for this type of coverage.
- Dealer vs. Broker Pricing: Dealerships often offer gap insurance, but their prices are typically higher than those offered by independent brokers or online providers. Shopping around can save you a considerable amount of money.
Types of Gap Insurance Available
Understanding the different types of gap insurance is crucial for selecting the right policy:
- Return to Invoice (RTI): This covers the difference between the insurance settlement and the original purchase price of the car.
- Vehicle Replacement Cover: This pays for a brand-new replacement vehicle of the same make and model, even if the price has increased since your original purchase.
- Contract Hire Gap Insurance: Specifically for leased vehicles, this covers any outstanding lease payments if the car is written off or stolen.
- Negative Equity Gap Insurance: This covers any shortfall from a previous car loan that has been transferred to your current loan.
- Agreed Value Gap Insurance: Uses a pre-agreed value rather than market valuations.
Key Car Insurance Companies That Offer Gap Insurance
Here are some of the top GAP providers in the UK.
- ALA Insurance: Known for competitive pricing and excellent customer reputation. ALA offers Vehicle Replacement and Return-to-Invoice policies with fair coverage terms, no mileage restrictions, and a claim period of 120 days. The company has not been affected by the FCA’s recent intervention in the GAP insurance market.
- MotorEasy: A one-stop-shop for various motoring services, including gap insurance. MotorEasy supports commercial vehicles up to 3,500kg and has high service ratings on Trustpilot and eKomi. They offer a simple quote feature and have resumed selling gap insurance after temporarily halting sales due to FCA intervention.
- Direct GAP: Offers a full range of GAP insurance products with flexible terms and conditions, promising to settle claims within ten days. They allow policy transfer to another vehicle or refunds for unused portions upon car sale. Direct GAP has also been unaffected by the FCA intervention.
- Platinum GAP: Part of the same group as Direct GAP, offering a similar range of GAP insurance products and conditions.
- Total Loss GAP: Offers a variety of insurance products beyond GAP, including scratch & dent and tire insurance. They have a comprehensive suite of GAP policies suitable for cars less than ten years old and with under 100,000 miles.
- GAP Insurance 123: A sister company to Total Loss GAP with similar GAP policy offerings.
How to Find the Best Gap Insurance Quote
To secure the best deal on gap insurance:
- Define Your Needs: Determine which type of gap insurance suits your specific situation (RTI, vehicle replacement, etc.).
- Shop Around: Use comparison tools and brokers to get quotes from multiple providers. Avoid relying solely on dealership offers.
- Provide Accurate Details: Be ready to provide information such as the vehicle purchase price, age, mileage, finance or lease balance, and terms of your existing car insurance.
- Compare Policy Features: Carefully review coverage limits, payout caps, claim exclusions, and policy lengths.
- Read the Fine Print: Pay attention to any exclusions or limitations, such as age restrictions on vehicles or requirements for comprehensive insurance coverage.
Recent Changes in the GAP Insurance Market
The Financial Conduct Authority (FCA) has recently addressed concerns about how car dealers sell GAP insurance. As a result, many car dealers had to temporarily stop selling GAP insurance in early 2024. While some online providers have also been affected, many continue to operate as normal. Experts recommend avoiding purchasing GAP insurance from car dealers, as online providers often offer the same or better coverage at a significantly lower cost.
Conclusion
Gap insurance provides essential financial protection for UK drivers against potential losses due to vehicle depreciation, outstanding finance, or lease agreements. By understanding the different types of gap insurance, shopping around for quotes, and carefully reviewing policy terms, you can find a policy that offers peace of mind and value. Whether you choose ALA Insurance, MotorEasy, or another reputable provider, securing the right gap insurance ensures you’re not left paying for a car you no longer own.
