Is GAP insurance worth it?

A single car driving on a road with green trees on either side

No one wants to think about their brand new car being written off by their insurance company after an accident or it being stolen from them but sadly these things do happen and covering all your bases can be a worthwhile venture.

We try to always get the best level of insurance cover that suits our circumstances but is GAP insurance really worth it? 

GAP insurance is one of those things where it will be the right decision for one person and not for someone else. It all depends on how old your car is, whether you have finance and what your expectations are in the event of an accident or your car being stolen.

What is GAP Insurance? 

GAP insurance, also known as Guaranteed Asset Protection insurance, is a separate insurance policy you can take out when purchasing a new car.

Vehicles depreciate a lot in their first three years and GAP insurance can bridge the gap between what you paid for your car, how much the car is currently valued at and what your insurers would pay out to you in the event of your car being written off or stolen. 

What are the pros to GAP insurance?

  • When the model of your car depreciates quickly –

All new cars lose their value quicker than older cars, however some models lose their value even quicker. Here are two examples at either end of the spectrum 

  • MG Motor UK MGG Brand new – £19,630 After 3 years – £5,250
  • Audi Q5 Brand new – £35,840 After 3 years – £22,970

Both cars have lost value but the MG loses a lot more value over the same time period. If you are buying a car that loses value rapidly then GAP insurance can help you recover your losses in the aftermath of an accident. 

  • You have a finance loan –

If you obtained finance to purchase your car and it is stolen or written off in the first few years you could find that you end up owing your finance company a lot more money than your insurance company is willing to pay out. In these circumstances your GAP insurance would pay the difference towards your remaining finance. 

  • You want a brand new replacement –

Normally when your insurers deem your car to be a total loss or unrecoverable after being stolen they will replace your car for one of the same age and in the same condition. However if your car is only a couple of years old you may be wanting a brand new replacement. In these circumstances having GAP insurance would be helpful.

What are the cons to GAP insurance?

As with everything in life there are of course some negatives – 

  • Extra expense –

In a world where we are already saturated with bills and other expenses, having GAP insurance is just adding one more expense to the pile. It is always best to shop around for the best deal and although some car dealers do offer this insurance, they are sometimes the more expensive option. 

  • Exclusions will apply –

Many insurers will only offer GAP insurance if the car is under a certain age. They will also not cover extras such as alloy wheels or spoilers. 

  • You must have comprehensive insurance –

Drivers who choose to have third party cover or third party-fire & theft will not be able to obtain GAP insurance no matter how new their car is. 

  • If your car is under 12 months old most insurers will replace your car outright –

This means that you will have been paying for GAP insurance when it is not needed. 

How do I know if GAP insurance is right for me?

GAP insurance is one of those things where it will be the right decision for one person and not for someone else. It all depends on how old your car is, whether you have finance and what your expectations are in the event of an accident or your car being stolen.

If you know that you would want to be able to get back the most amount of money to be able to either pay off your finance or purchase another new car then GAP insurance may be a perfect fit.

However, if you have a slightly older car then GAP insurance may be an extra monthly expense that is not worth it. Older cars depreciate much slower than newer cars. The most amount of a cars value is lost within the first three years of a cars life. If you are still unsure then there are lots of price comparison websites where you can see exactly what a GAP insurance policy will cost you and the benefits that you will receive with it. 

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