Gap Insurance: What It Is, Who Needs It, and How to Compare Policies

When you drive a new car off the forecourt, it immediately begins to lose value. In fact, most new cars lose up to 60% of their value within the first three years. If your vehicle is written off or stolen during this time, your standard car insurance will only pay out its current market value—not what you originally paid. That’s where gap insurance comes in.

Gap insurance, short for “Guaranteed Asset Protection,” is a specialist cover that bridges the difference between what your insurer pays and what your car was originally worth (or still costs to settle under finance).

In this guide, you’ll learn how gap insurance works, who should consider it, the types available, and how to compare policies effectively.

What Is Gap Insurance?

Gap insurance covers the “gap” between your car’s value at the time of loss and either:

• The original purchase price

• The amount outstanding on your finance or lease agreement

• The cost to replace the vehicle with a brand-new equivalent

For example, if you paid £25,000 for a new car and it’s written off two years later when its market value is £14,000, your insurer will only pay the £14,000. Gap insurance would pay the remaining £11,000 to cover the original price or settle your finance deal in full.

Types of Gap Insurance

There are several types of gap insurance. Each is designed to meet a different ownership or finance scenario.

Return to Invoice (RTI)

This covers the gap between the insurer’s payout and the original invoice price of the vehicle. Best for brand-new car buyers who paid outright or with a personal loan.

Finance Gap Insurance

Covers the difference between your insurer’s payout and the amount left on your car finance agreement. Ideal if you’re on a PCP (Personal Contract Purchase) or HP (Hire Purchase) plan.

Return to Value (RTV)

If you bought a used car, RTV pays the difference between the current value at time of write-off and the original market value when you bought it.

Lease Gap Insurance

If you’re leasing, this policy pays off any outstanding rentals or termination fees if your car is declared a total loss.

Who Should Consider Buying Gap Insurance?

Gap insurance isn’t essential for every driver, but it is worth considering if:

• You bought a brand-new car

• You used PCP or HP finance

• Your car depreciates quickly

• You made a small deposit on your finance deal

• You’d struggle to cover a shortfall if your car was written off

Used car buyers and those with high deposits or low-risk vehicles may not need it. Always compare the cost of the policy with the potential payout to decide if it’s worthwhile.

How Much Does Gap Insurance Cost?

The price of gap insurance depends on:

• Vehicle price and age

• Type of gap policy

• Duration of cover (usually 1–5 years)

• Whether it’s bought from a dealer or independent provider

Buying from a dealer is usually more expensive. Independent online providers often offer the same cover for up to 60% less.

Typical cost range:

Prices are estimates as of 2025 and may vary based on provider, vehicle age, and condition.

Top UK Gap Insurance Providers

Here’s a comparison of some leading UK gap insurance providers, what they offer, and how they differ:

Always check for exclusions and T&Cs before purchasing.

When Does Gap Insurance Pay Out?

Gap insurance only pays out if your car is:

• Written off in an accident

• Stolen and not recovered

• Declared a total loss by your insurer

It won’t pay if the car is repairable, even if the damage is extensive. Claims are only valid if your standard car insurance policy pays out in the first place.

When Should You Buy Gap Insurance?

The best time to buy gap insurance is:

• At the point of purchase (for best value and longer duration)

• Or within 90–180 days of purchase (varies by provider)

Buying early ensures full protection from the moment you drive off the forecourt. If you wait longer, providers may reduce the payout limit or refuse cover.

What’s Not Covered?

Gap insurance has exclusions. Common examples include:

• Wear and tear damage

• Modifications not declared to your insurer

• Negative equity from previous finance

• Using the vehicle for hire or courier services (unless specified)

• Theft if keys were left in the vehicle

Always read the full terms to avoid rejected claims.

Tips for Getting the Best Deal

• Avoid dealer-sold gap insurance unless it’s discounted.

• Use comparison sites like MoneySuperMarket or specialist providers directly.

• Buy online to save on commission fees.

• Only pay for the cover duration you need (match your finance or lease term).

• Check if your car insurer already offers gap-like benefits in your policy.

Is Gap Insurance Worth It?

Gap insurance isn’t mandatory, but it can offer critical financial protection—especially if your car is brand new or on finance. A small one-off payment today could save you thousands in the event of a total loss.

It’s most valuable for:

• New car buyers

• PCP or HP finance users

• Low-deposit finance agreements

• Leased vehicles

If you’re driving an older or lower-value used car, gap cover may not offer significant value.

Conclusion

Gap insurance is designed to protect you from a major financial shortfall if your car is written off or stolen. While not essential for everyone, it’s particularly useful for drivers with new or financed vehicles that depreciate quickly.

To get the best value, shop online, compare specialist providers, and avoid high dealership mark-ups. Choose the right policy type for your ownership situation, and make sure you understand the terms and exclusions.

A well-chosen gap policy offers peace of mind—ensuring that if the worst happens, you won’t be left paying for a car you can no longer use.