GAP insurance or Gap Asset Protection insurance as it stands for, basically covers the ‘gap’ between your car’s market value as may covered by your car insurance and how much it was worth when you bought it. So do you need to buy GAP insurance?
GAP insurance is becoming increasingly popular, particularly with the high rate of car depreciation and therefore the likely difference between what you paid for your new car and what it’s currently worth.
This gap between what you paid for the car and what it’s worth now is not covered by standard car insurance. Should your car be stolen or involved in an accident your car insurance claim will usually only cover up to the market value of the car and not what it was worth when you bought it, thereby leaving you with a gap in the amount you get.
Check your car insurance to understand exactly what your payment would be should you need to claim to replace your car. This can help you determine whether or not you need GAP insurance.
If you are concerned that you cannot cover the cost of this gap yourself, buying GAP insurance may well be worthwhile.
There are four types of GAP insurance policy – Return to Invoice GAP insurance, Return to Value GAP insurance, Finance GAP insurance and Replacement GAP isnurance
GAP insurance may be particularly useful if you’ve bought your car using a car finance loan. It can be used to cover the shortfall between what your car insurance pays and the amount that you have outstanding on your car loan or other finance.
Car insurance is a legal requirement. GAP insurance is not. It is taken out in addition to your car insurance.
Whilst not a legal requirement, it can provide comfort that should you car be stolen or written off in an accident, you know that the difference between what you can claim on your car insurance and the cost of paying off an outstanding loan or replacing the car, is covered.