A straightforward guide to Guaranteed Asset Protection — what it covers, when you need it, how much it costs, and whether it is worth buying in the UK.
GAP insurance pays the difference between what your car insurer gives you if your car is written off and what you originally paid (or still owe on finance). It covers the "gap" between a car's depreciating value and your outstanding loan or purchase price.
When you buy a new or nearly-new car, it starts losing value the moment you drive it away. If the car is written off or stolen six months later, your insurer pays out the current market value — not what you paid for it.
That's where a gap appears. You owe the finance company what you originally borrowed, but the insurance payout is now much less. GAP insurance covers that shortfall so you are not left out of pocket.
You buy a car for £25,000 on finance. A year later it's stolen. Your insurer values it at £19,000 and pays you that. But you still owe the finance company £22,000. That's a £3,000 shortfall — and GAP insurance would cover it.
Not all GAP insurance is the same. In the UK there are three common types, and picking the right one depends on how you bought the car.
Pays the difference between your insurer's valuation and the price you paid for the car. Best for outright purchases.
Pays the difference between your insurer's valuation and what you still owe on finance. Best for PCP or HP agreements.
Pays the cost of replacing your car with a brand new equivalent. The most comprehensive (and expensive) option.
Whether GAP insurance is worth buying depends entirely on your situation. It's a useful safety net for some drivers and a waste of money for others. Here's an honest breakdown.
GAP insurance typically costs £100 to £400 for a three-year policy when bought from an independent provider. If you buy it through a car dealership at the point of sale, it's often significantly more expensive — sometimes £500 or even £1,000+ for similar cover.
The FCA (Financial Conduct Authority) has repeatedly criticised dealerships for overcharging on GAP insurance, so it almost always pays to shop around with independent specialists rather than accepting the first quote the dealer offers.
You can buy GAP insurance at any time within the first 180 days of owning your car (or sometimes longer, depending on the provider). You don't have to buy it from the dealership, and in most cases you absolutely shouldn't.
Dealers often pressure buyers into taking it at the point of sale when emotions (and the excitement of a new car) run high. You'll almost always get a better deal by saying no to the dealer and buying standalone cover from an independent provider a few days later.
GAP insurance can save you thousands of pounds if your car is written off or stolen in the first few years of ownership, especially if you bought it on finance. But it's not always worth the money — and it's almost always cheaper to buy from an independent provider than from the dealership.
The most important rule: never buy GAP insurance on the day you buy your car. Take a few days, shop around, and make an informed decision.