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28 Jul 2023

Gap insurance explained

Gap insurance is designed to cover the difference between the amount your insurer pays out if your car is stolen or written off, and the price you paid for it

Dean SobersSenior researcher & writer

In this article

What does Gap insurance cover you for?

Gap insurance protects you when you buy a new car. It's designed to cover the difference between the amount your car insurer would pay out if your car was stolen, or written off, and the price you paid for your car.

Suppose you've just spent £15,000 on a car, or have taken out finance to that amount. You drive the car home, and then a week later it's stolen or written off in an accident.

Your car insurer hands you a cheque for £10,000. You paid the dealer £15,000 – but by the insurer's estimates, £10,000 is what the car is actually worth, as cars depreciate notoriously quickly.

This leaves you £5,000 down or, even worse, potentially in debt to the tune of £5,000 (plus interest) to your car finance company for a car you no longer own.

Where your car is a total loss, 'Gap' insurance (short for guaranteed asset protection), is designed to work alongside your standard car insurance. It tops up the difference between what they will pay, and what you'll actually need to get back on the road.

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Video guide: gap insurance explained

Does Gap insurance cover the full value of my car?

Gap insurance won't directly replace your car or pay you its value in full. You still need regular car insurance.

Instead, depending on the type of cover you buy, it will ensure that after your car insurer's settlement is paid, you're not left short of what you need to clear off your finance debt, or purchase a replacement of the same make and model.

It can also help to bridge the difference between what your main insurer has paid and what you paid to buy the car in the first place.

Find out more: the best car insurance providers

When is Gap insurance needed?

We think Gap insurance can be useful and is therefore worth thinking about, but it won't make sense for everyone.

Generally speaking, Gap is likely to be worthwhile in the following situations:

You used a large loan to buy your vehicle

Gap insurance can offer a means of paying off outstanding finance on your car, which means if your car's stolen or damaged beyond repair you won't have to continue to make payments on it.

You're concerned about the depreciation of your vehicle

The quicker your car loses its value, the less your insurer will pay after a total loss incident, compared to what you paid for it. Gap insurance means you'll get more back.

Your car is on a long-term lease

If you have a long-term rental agreement for a vehicle with a mileage allowance, a write-off could leave you without a car and a bill for thousands of pounds. Gap insurance can help protect against this.

Key information

What about the 'new car replacement' cover in my car insurance?

Most car insurers offer 'new car replacement', which means that if your car is brand new, the insurer will provide a like-for-like replacement if it's stolen or written off in its first year.

Gap insurance can usually only be bought up to a year after your car, but some providers allow you to defer your cover until year two if you'd prefer to rely on your new car replacement cover during year one.

If you're considering this, bear in mind that new car replacement cover is subject to conditions and doesn't fully replicate the protection of Gap insurance. In some scenarios you could still potentially face a cash shortfall.

Your car insurer may revert to paying a cash settlement if a like-for-like replacement isn't available, or if the costs of damage to the car aren't high enough (typically 50-60% of the car's list price). The settlement won't necessarily be the same amount you paid for the car or borrowed on finance.
If you're using finance to pay, the finance provider doesn't have to accept a replacement vehicle from the car insurer. They may insist on you paying off the full finance amount in cash.

Carefully check your car insurance T&Cs and your finance provider's policies on replacement vehicles to be sure you have cover that you're comfortable with.

Do you have to buy Gap insurance from a car dealer?

No you don't. Many people are introduced to Gap insurance in a car dealership, as it's usually offered as part of the bundle of 'extras' sales staff will try to get you to buy.

However, while Gap insurance is a worthwhile product, your dealership probably isn't the best place to buy it. It can often be found far more cheaply online, sold directly by insurers and brokers, or via comparison sites.

For a gap insurance quote, you can visit the following websites: GAPInsurance.co.uk, Total Loss Gap, Click4GAP, ALA Insurance, Car2Cover, Direct Gap or MotorEasy.

Dealerships selling Gap insurance must tell you the following before you buy a policy:

The total premium for the Gap insurance.
The length of the policy.
The features, benefits, unusual exclusions and limitations of the product.
That the product can be bought elsewhere from standalone providers.
Whether Gap insurance is an optional or compulsory add-on to the sale of the vehicle.

In addition, dealerships can't sell you Gap insurance on the same day they sell you a car. There must be at least a two-day break, unless you decide to waive the waiting period.

If you do wait two days or longer, the provider should go over the detail of the policy again. The decision to waive the waiting period must be initiated by you; it can't be suggested by the dealership.

Can you take Gap insurance out at any time?

Usually not. Unlike normal car insurance, which you purchase annually each year, Gap insurance cover can last for as long as five years. But it usually needs to be bought within the first year of owning your car, even if you defer the cover so it only kicks in from year two.

This 'window' can vary by provider, however.

Check you're getting a great deal and search for a new car insurance policy using the service provided by Confused.com. Get a quote now.

How to shop around for Gap insurance

As with standard car insurance, you can compare Gap insurance policies online to find the cheapest deal for you.

Whatever policy you choose, check the key features before you buy. The following are just some of the important elements you should look out for:

length of the policy
excess
any significant exclusions
the value of your vehicle
how to claim on your policy
how to cancel your policy if you no longer need it.

Our cost comparison figures show how much you can save by shopping around.

Which kind of Gap insurance is best for you?

There are many types of Gap insurance product, with different providers offering their own unique spin, or combinations of cover.

While some are more basic than others, they're suitable for different purposes. Which one is best for you depends on your purposes.

Finance Gap insurance

One of the most basic products on the market (and quite often a feature of other types of Gap cover), this helps you pay off any outstanding loan payments on your car if it's written off.

However, this usually won't include payments for negative equity.

Negative equity Gap insurance

If your finance settlement (the amount you've borrowed) is higher than the cost of your car, the extra sum is referred to as 'negative equity'.

This usually comes about if you part-exchanged a previous car prior to paying off its finance, transferring the remaining debt from that loan to your current car. A finance Gap insurance payout won't cover this older debt. Negative equity Gap Insurance will.

Vehicle replacement Gap insurance

Rather than helping you reach the amount you paid for the car, vehicle replacement cover bridges the distance between your car insurance payout and the cost of replacing your vehicle with a new one.

Return to value Gap insurance

Return to value Gap is similar to return to invoice Gap insurance, but instead of helping you get exactly what you paid for the car, it pays the difference between your car insurance settlement and the value of the vehicle when it was first purchased.

This could prove useful if you bought the car second-hand, or you've had the vehicle for a long time.

Lease gap insurance

If you leased your car rather than buying it outright, lease Gap insurance helps you pay the rest of your contract and any fees that may apply for cancelling your lending agreement early.

Gap insurance reviewed

These tables show example costs of vehicle-replacement and return-to-invoice Gap policies for three different cars bought brand new, from the most prominent online providers.

We also list some key elements of cover provided by the the policies. These include:

Excess How much your Gap insurance policy will pay towards your car insurance excess.
Maximum level of cover How much cover you can take out.
Cover availability How long you can take out the Gap insurance for.
Age of vehicle The age limit of the vehicle that each Gap insurer will cover.
Maximum value Of vehicle that each Gap insurer will cover.

To see the extent of what is and isn't included, we recommend checking the policy wording before purchase.

Vehicle replacement Gap cover


ALA	£198	£240	£266	£347	£250	£50,000	1-4	7	£125,000
Car2Cover.co.uk	£179	£199	£229	£259	£250	no upper limit	1-4	1	£125,000
Direct gap	£189	£249	£285	£308	£1,000	£50,000	1-5	9	£75,000
InsuretheGap	£169	£176	£211	£226	£250	no upper limit	1-4	1	£150,000
Total Loss Gap	£149	£168	£218	£235	£250	no upper limit	2-5	4	£50,000 online; higher by phone

Prices collected from company websites in July 2023. These are for three years cover for a brand new car bought on finance from a franchised dealer. The driver uses the car for domestic, social and pleasure purposes as well as commuting to one place of work.

Return-to-invoice Gap cover


ALA	£168	£187	£238	£295	£250	£50,000	1-4	10	£125,000
Car2Cover.co.uk	£149	£174	£199	£227	£250	no upper limit	1-4	10	£125,000
Click4Gap	£221	£224	£252	£324	£250	£50,000	3-4	7	£75,000
Direct gap	£139	£203	£238	£261	£1,000	£50,000	1-5	9	£75,000
Gapinsurance.co.uk	£144	£165	£197	£197	£250	no upper limit	1-4	9	£100,000
Gapinsure.com	£194	£257	£293	£402	£500	no upper limit	2-3	9	£125,000
InsuretheGap	£138	£145	£186	£198	£250	no upper limit	1-4	10	£150,000

How to claim on your Gap insurance

Once your car insurer has offered your settlement, you can make your Gap insurance claim.

Check your Gap insurance terms and conditions before you start the claim. See whether there are any time limits in submitting your Gap claim, what your excess is and what information you'll need to have ready for them.

It's best to speak to your Gap insurer before you accept any settlement from your car insurance provider. Many Gap providers insist you speak to them before agreeing a claim.

If you have finance as part of your Gap insurance policy, it's worth discussing how any outstanding loans are settled, and whether this will automatically be paid on your behalf.

Unsatisfied with the response? Complain

If your Gap insurer doesn't handle your case in a fair and timely manner, don't be afraid to complain. Details of how to do this should be listed on your policy document.

If you've exhausted the insurance company's complaints procedure and your claim has not been settled, contact the Financial Ombudsman Service (FOS).

You usually have six months from the time you reach deadlock with the insurer to make a FOS complaint.