Gap insurance

What is gap insurance?

Gap insurance policies are designed to close the ‘gap’ between what you paid for your car, and the amount your insurer would pay out if you claimed.

Insurers only pay the market value if your car is written off or stolen, meaning you could be left out of pocket. This type of policy is most commonly bought for brand-new cars because of how fast they depreciate.

Gap insurance ensures you don't end up losing money. The amount of cover you get will depend on the level you choose when taking out a policy.

What types of gap insurance are there?

There are three types of policies to choose from when you get a quote:

• Vehicle replacement insurance (VRI) is suitable for second-hand cars. It covers the difference between the insurance pay-out and the cost of replacing your car to the same specification as when it was bought.


• Return to invoice (RTI) is suitable for cars that were bought brand new. It pays the difference between the insurance pay-out and the original value of the car. If your car is declared a total loss, you're covered by gap insurance, including any outstanding finance.


• Finance, lease & contract hire protects you if your vehicle's declared a total loss. It's suitable for HP, PCP, lease and contract hire vehicles. This type of gap insurance will pay the difference between the outstanding finance balance and the motor insurer's settlement.

What doesn't gap insurance cover?

To qualify for gap insurance, the age, mileage and price of the car must fall within a certain range and the car must feature in Glass’ Guide.

Most policies cannot cover:

• Cars with a purchase price of over £75,000 (unless they have an approved tracking device).
• Vehicles over 10 years old.
• Vehicles that have driven more than 100,000 miles when the policy is purchased.

Gap insurance doesn't cover taxis, private hire vehicles, cars and vans used for any other type of ‘hire and reward’, or vehicles used for racing, rallying or any other competitive event.

Is gap insurance worth it?

New cars depreciate quickly. From the moment they leave the shop their value drops. Generally, a new car depreciates a staggering 20% per year on average.

For example, if you purchased a car for £20,000, by year three it’ll be worth about £10,000 at market value. This is based on approximately 20% annual depreciation.

If your car is declared a total loss, your insurer will only pay out the market valuation of £10,000. It’s unlikely that this’ll be enough to buy a newer equivalent model. So you’ll have to pay the £10,000 difference or settle for an older car.

Having gap insurance in place would mean you would get £20,000 in the event of a claim, £10,000 from your insurer and £10,000 from gap insurance. So you’d be able to get a new replacement without having to pay yourself*.

Gap insurance could be worth considering if you’re worried about not getting the price you paid back for your car if it was written off or stolen. Or if you’re likely to be in negative equity if something were to happen to your car.

*Return to invoice or vehicle replacement policies only.