What are the different types of GAP insurance?

A man with his hand on a car steering wheel wearing a watch

Most people have heard of third party and comprehensive insurance but GAP insurance is the lesser known ‘extra’ that you can purchase for some added piece of mind when you purchase a new car. However GAP insurance isn’t a one size fits all and there are three different options you may want to choose from. 

Deciding which type of GAP insurance is the right fit for you will depend on what you are looking to obtain in the result of an accident or your car being stolen and unrecoverable.

Why do I need GAP insurance?

Technically you do not need Guarantee Asset Protection insurance. However if you purchase a brand new car it can be helpful to have GAP insurance for some extra security, in case your car is written off after an accident or stolen.

Your GAP insurance will pay you the difference between what you initially paid for your car and what your insurance company is willing to pay you based on the vehicle’s current value.

New cars depreciate rapidly in their first three years and in the aftermath of an accident you may find out that what your insurer is willing to pay you is a lot less than you originally purchased your car for. 

What are the three types of GAP insurance? 

  • Finance GAP InsuranceIf you obtained a finance loan to purchase your car you could be left with quite a large amount owing to the finance company if your car is written off or stolen. This level of GAP insurance will ensure that the remaining finance on the car is covered. 
  • Return To Invoice GAP InsuranceThis covers the difference between what you initially paid for the car and how much your insurer is willing to pay you. In the first three years cars can lose over half of their value, in fact a third of its value is lost as soon as you drive your new car out of the dealership. You can use this level of cover for both brand new cars and used cars. 
  • Vehicle Replacement GAP InsuranceThis cover will ensure that you are covered for the cost of a replacement car in the same model and with the same specifications of your old car, even if the price has gone up. 

Can I obtain GAP Insurance on a used car? 

You are able to purchase GAP insurance on a new car although some insurers will only offer this on cars under a certain age. Also, used cars do not lose their value as quickly as new ones so GAP insurance may not have as much benefit. 

How do I choose which type of GAP insurance is the right one for me?

Deciding which type of GAP insurance is the right fit for you will depend on what you are looking to obtain in the result of an accident or your car being stolen and unrecoverable.

If you have purchased your car on finance then the Finance GAP insurance would probably be best. Alternatively if you know that in the event of needing to claim on your GAP insurance you would want a brand new replacement then you would be better off having the Vehicle Replacement GAP insurance

Many dealerships offer GAP insurance when you purchase the car but this may not always be the cheapest option.

Do be sure to get comparison quotes online and speak to different insurers. Not only will they be able to give you a quote, they will also be able to advise you on what the best type of insurance is based on your requirements. 

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