Is GAP Insurance Worth It?

If you’ve bought a car on PCP (Personal Contract Payment) or HP (Hire Purchase), you’ve probably been offered the option to purchase GAP insurance. But do you need it?


We answer your questions so you can decide if GAP insurance is worth it.


What is GAP Insurance?

GAP stands for ‘Guaranteed Asset Protection’. GAP insurance is specifically designed to cover any difference between the price you are paying to buy your vehicle and the value calculated by your insurance company if it is written off in an accident or stolen. It’s also sometimes known as ‘shortfall’ insurance because it covers any shortfall between these two amounts. With it, you can settle any outstanding finance and start again with a new car and contract.


Do I need GAP Insurance?

If you buy a car using finance, you commit to paying a monthly amount for the duration of the loan. Interest on the loan means the amount you need to pay is more than the value of the car at the point of purchase. And almost every car will go down in value with age and use.


If you have an accident and your car is written off, or it is stolen, your insurance company will pay out the market value of the vehicle at that point. Problems can arise if the value of the car is substantially less than the amount still owing on the loan. You’ll need to find the extra cash to cover this shortfall unless you have already taken out GAP insurance.



Is GAP Insurance worth buying?

Whether GAP insurance is worth it depends on several different things.

  • Are you happy to take the risk you’ll have to pay extra if there is an accident or your car is stolen? If not, GAP insurance buys you peace of mind, so there will be no unexpected bills.
  • Can you afford to pay out any difference in value if you have to? If not, you could find yourself paying out the vehicle loan but with no vehicle to drive to get to work or to take the kids to school.
  • Is your car less than a year old? In most cases, insurers will pay out for a brand new car if your vehicle is less than a year old when it is written off. In this case, you probably don’t need GAP insurance.
  • How much was your car when you bought it? A 50% drop in the value of a vehicle worth £10,000 equals £5,000 difference. A 50% drop in the value of a car worth £40,000 equals £20,000. The higher the cost of your loan, the more likely you are to need GAP insurance to help pay for any shortfall.


For a relatively low cost, GAP insurance takes away any risk.



How much can cars depreciate by?

Depreciation is the difference between the amount you pay for a vehicle, and it’s value when you come to sell it. The moment you drive a new car off the garage forecourt its value plummets. Some cars hold their value better than others, but What Car magazine estimates that most cars will lose between 50% and 60% of their purchase value in the first three years. The age of the vehicle and the number of miles covered can also impact on depreciation.


What to watch out for when you buy GAP insurance

There are different types of GAP insurance available.


1) Return to invoice GAP insurance

This is one of the most common forms of GAP insurance. It pays the difference between the amount you paid for the car and the amount your insurer will pay if your vehicle is declared a total loss.


2) Return to value GAP insurance

This is similar to Return to Invoice cover but will top up funds to the amount the car was worth when you bought it, not the amount you paid for it. This is most suited to expensive second-hand cars.


3) Finance GAP insurance

This pays off any outstanding finance if your car is written off.


4) Vehicle replacement GAP insurance

This pays the extra money needed for you to buy a brand new replacement vehicle of the same model and specification. It’s particularly useful if your car is over a year old and you want a brand new replacement vehicle, not a second hand one.


5) Lease GAP insurance

This is designed for anyone who leases a car. If the vehicle is written off, it will pay the rest of the contract, including any early settlement fees. That leaves you free to start a new lease with a new car.


Should I buy GAP insurance from my car dealer?

If you do decide that GAP insurance is right for you, don’t feel pressurised by the car salesman to buy it from them. Get a quote from them and then go home and get quotes from other companies. In most cases, you’ll be able to find a better deal elsewhere. If you can’t find a better deal, you can still go back to the dealership to take out the GAP insurance they offer.


Where can I buy GAP Insurance?

With so many people buying their car on finance, GAP insurance is a popular product, and many insurance companies offer it. Like all insurance, it’s worth shopping around for the best deal. If you don’t have time or don’t know where to look, use an insurance broker like Park Insurance.



  • You don’t need to buy it from the same insurance company as you use for your primary car insurance.
  • You don’t have to use the insurance offered by the garage or finance company when you buy the car.



GAP Insurance is worth considering if you don’t like to take financial risks or can’t afford to. It gives you peace of mind that you can drive the car you want to, and there will be no unexpected bills to face.


If you need GAP insurance, you can trust at a budget-friendly price, call Park Insurance’s specialist team on 0117 955 6835 or get a free quote. We’re one of the UK’s largest independent insurance brokers, and we’ve been helping our customers for nearly 30 years to find reliable insurance at a price to suit every budget.

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