GAP Insurance, Do I Need It?

Having your car stolen or entirely written off in an accident is every motorist’s nightmare, especially if it should happen to a brand new vehicle. Often sold when you buy a brand new or nearly new car, Guaranteed Asset Protection (GAP) insurance covers the difference between the current value of your car (which the vehicle insurer would usually pay out) and either the amount you paid for the car or the value of any outstanding payments.

Depreciation means brand new cars lose their value very quickly. The AA reports that on average a brand new car decreases in value by up to 60% after three years.

So for example Mr X buys a £20,000 new car, 3 years later it’s involved in an accident and written off, your insurance company would settle based on the current market value, so at a 60% depreciation, Mr X would be paid £8,000 by hi scar insurance company, £12,000 less than he paid for it just 3 years ago. Luckily Mr X took out a 4 year GAP policy covering him up to £15,000. The GAP insurance policy pays the difference between what the car insurance company settled on and what Mr X originally paid for the car, so the GAP insurer pays Mr X the £12,000 difference.

Do I need GAP insurance?

It’s not essential that you have a GAP policy, and most people only think about taking out a policy after they’ve written a previous vehicle off and realise how handy it would have been.
Some extra advice on whether it could be right for you:

• If you owe more than your car is worth, you risk being in negative equity. This is when GAP protection could be useful, for example if the down payment for your finance deal was small, if you’re paying a lot of interest or if you are paying the debt off over a longer period.
• Similarly, if you’ve signed up for a long-term contract hire arrangement, loss of the car might mean you end up owing the company more than your insurance provider will pay out.
• If you are concerned that you wouldn’t be able to afford to replace your car on a new-for-old basis, GAP protection could also be helpful.

When is it unnecessary?
Most fully comprehensive car insurance policies offer brand new car replacement during the first 12 months of ownership as long as you’re the first registered owner – although this may include restrictions such as excluding theft or accidents where the insured is at fault. Alternatively, your finance agreement may already cover you for the difference between the official value of the car and how much you paid. Be careful to read the terms and conditions to avoid paying for cover you don’t need.

How Do I Get A GAP Quote
Here at Hodgson Insurance we’ve teamed up with Nice 1 to bring you a quick and easy online quote system. It can take less than a minute to get a price on 2-4 years cover.

Click Here For More Info Or To Get An Instant GAP Quote

• Your vehicle doesn’t have to be brand new, vehicle up to 10 years old can be covered.
• Vehicles must have been purchased within the last 180 days.
• Cover available for cars, vans and motorcycles.
• A GAP policy will also cover up to £250 of your car insurance excess.
• Up to £100,000 vehicles catered for.
• Up to £20,000 GAP cover available.