Say you bought your car for £8,000, which depreciates at roughly 20% per year.
By year three, it’ll be worth about £4,000 at market value. That’s nearly a 50% drop overall!
If your car is stolen or written-off, then your insurer will only pay out the market valuation of £4,000. It's unlikely that this'll be enough to buy a newer equivalent model, leaving you to fork out for the £4,000 shortfall or settle for an older car.
If you’d taken out gap insurance when you’d first bought your car, you’d get £8,000 (£4,000 from your insurance policy and £4,000 from the gap cover). This would mean you’d be in a better position to get a suitable replacement without having to dip into your own pocket.