Gap insurance

Worried about losing money if you ever need to claim big on your financed car? Consider whether gap insurance could offer you peace of mind and ensure you won't lose a penny.


Gap insurance policies are optional but if you do decide to take out gap insurance, you’ll also need to have comprehensive car insurance alongside it. Gap insurance essentially offers you extra protection if your car is ever written off or stolen and the amount you get from your insurance payout doesn’t match the car’s original price tag.
What you originally paid for your car and what your insurance provider may pay out for your car based on its current value can be two very different amounts. Don’t be left out of pocket. Read our guide to discover how gap insurance works and see if any options are right for you.

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What is gap insurance and what does it cover?

It’s a simple fact that as soon as you buy a car, its value starts to depreciate. There’s very little that can be done about this but what happens if your car is stolen or written off? Chances are your insurance provider will pay you what it believes is the current value but this can be far less than what you paid for it, leaving you out of pocket when you come to buy a replacement.

Guaranteed asset protection or gap insurance works by paying out the difference in what the insurance provider pays you compared to what you originally paid allowing you to buy a new car with the same amount of money as your originally spent on the car.

Gap insurance might also protect you against any outstanding amount if your car was financed and the insurance provider’s pay out falls short on what you actually owe.

Gap insurance is mainly associated with new cars although newer second-hand cars might also benefit from gap insurance. It can typically last for around four or five years, or until a claim is made. Depending on the policy, there is also a maximum amount that you will be able to claim, which can be anywhere from £25,000 up to around £100,000.

What does gap insurance not cover?

Gap insurance will not cover you in some instances. It is therefore vital that you read your policy document carefully before taking out a policy. Some exclusions include:

  • If your car is written off as a result of racing or another form of competing.
  • If you’ve modified your car after purchasing it, the amount spent on these modifications will not be covered.
  • If you don’t have comprehensive car insurance on your car.

What are the different types of gap insurance?

There are four main types of gap insurance, which include:

  • Return to invoice. This would cover the difference between what your insurance provider pays you and the exact price you paid for your car.
  • Vehicle replacement. This would cover the difference between what your insurance provider pays you and the cost of buying a new replacement car similar to the previous car. This is mainly for brand new cars recently purchased within a few months and with a low mileage.
  • Return to value. This would cover the difference between what your insurance provider pays you and what your car’s original market value was when you purchased it.
  • Finance. This would cover any outstanding balance if you financed your car and still owe money on it even after your insurance provider’s pay out.

How can I get the right gap insurance policy?

To decide which type of gap insurance might be suitable for you boils down to how you purchased your car in the first place and if you would want to buy a brand new car if your car was ever stolen or written off. Your car insurance might already cover the cost of a similar replacement car if yours was ever stolen or written off but if it doesn’t, that’s where gap insurance might be considered.

Return to invoice gap insurance might suit you if you recently purchased a new or second-hand car in the last few months that is worth up to £120,000.

Vehicle replacement gap insurance might suit you if you recently purchased a brand new car within the last few months and it has a low mileage.

Return to value gap insurance might suit you if you purchased a new or second-hand car more than a few months ago that is worth no more than around £50,000.

Finance gap insurance might suit you if you purchased a car with the help of a loan.

Consider your options and check the policy details carefully to ensure it offers you the right protection in the event of you needing to make a claim.

Pros and cons of gap insurance


  • Suitable for drivers that still owe money on a financed car.
  • Suitable for drivers who would want a brand new car if their car was ever stolen or written off.


  • Unsuitable for drivers of older second-hand cars.
  • Unsuitable for drivers that already have car insurance that includes “new replacement cover” for a car during the first 12 months.

Frequently asked questions

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