Does GAP Insurance Cover A Stolen Car?

GAP insurance (Guaranteed Asset Protection) is an optional insurance policy that many car owners purchase to cover any shortfall in their mandatory car insurance paying out. GAP cover is typically available within a few months of purchasing a new car and is also typically offered at the point of sale or point of a lease agreement being reached.

“Gap Insurance provides you with essential protection against your car depreciating between the time you bought it and when it is stolen or damaged beyond repair”

Your motor insurance will typically pay a settlement amount equivalent to the market value at the date of loss. This can leave you with a shortfall when it comes to replacing your car, or worse, having to continue to pay the finance contract deficit. In short, Gap Insurance is designed to cover this shortfall to ensure you’re not left out of pocket… and for the many thousands of people who’ve suffered from their car being stolen, it’s a life saver!

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Related Reading: Top Tips On How To Prevent Car Theft

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How GAP Insurance Covers Car Theft

A GAP insurance policy provides cover if your vehicle is stolen and subsequently not recovered and therefore declared a total loss. A GAP policy also pays out if a stolen car is found but has been too badly damaged and is no longer usable.

Today, modern security technologies have advanced significantly. So much that with the use of key fobs, advanced car locking systems and electronic signals it is much more difficult to steal new vehicles. However, car theft is still on the rise because instead of targeting a car’s locking mechanisms, criminals now focus on obtaining their dedicated keys. There is also the horrible situation of carjacking, where people are threatened with violence if they refuse to hand over their keys.

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Related Reading: 10 Most Stolen Cars In The UK 2023

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In such circumstances, no car owner can be held responsible for their car being stolen and in the event that the police are unable to track down and recover the vehicle, your standard car insurance provider will pay out (but this will leave a shortfall in the amount your receive) and so a GAP insurance policy will pay out to cover your deficit (covering this shortfall).

Note: There are times when having your car and its keys stolen can be an obstacle to GAP insurance pay-outs. While standard car insurance providers will pay car owners when their stolen car can’t be recovered after the scenarios listed above, some circumstances see them refuse to settle.

For example, if the insurance provider decides that the car would not have been stolen had the owner taken appropriate care of either the keys or vehicle, then they will not pay out. Such negligence as leaving your car unlocked and with the keys in the ignition or leaving the keys in a public place where anyone can access them are classic cases of negligence.

Another is if your home is burgled because you left doors or windows open when nobody was in, this would make you negligent too. GAP insurance works the same way standard car insurance does. If your compulsory car insurance policy won’t pay out due to your personal negligence, neither will your GAP insurance.

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Related Reading: Why Do I Need Gap Insurance?

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What Does “Give Indemnity” Mean?

In situations where a car owners keys and vehicle are stolen at no fault of their own, car insurance policies typically say that the car owner acted with appropriate care and attention. Thus, when a standard car insurance policy pays out, any reputable GAP insurance policy will do the same. To ‘give indemnity’ is standard on any good GAP insurance cover. It means that provided your car insurance company gives you indemnity for the stolen car claim, your GAP insurance provider will too.

As such, regardless of the circumstances that result in your vehicle being stolen and not retrieved / written off, it makes no difference. When your standard car insurance provider is satisfied to settle, your GAP policy will automatically pay out for the shortfall.

With this in mind it is always best to clarify ‘given indemnity’ with any would-be gap insurer you are thinking of going with, just to make sure.

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Related Reading: Lost Or Stolen Car Keys?

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How Does Gap Insurance Work When A Car Is Stolen?

This is the process to follow for gap insurance when your car is stolen:

1. Report the theft: Once you realise your car has been stolen, your first step should be to report the theft to the police and then to your car insurance company.

2. Wait for the claim decision: Your car insurance company will investigate the theft. If the car isn’t recovered, it is typically declared a total loss. After determining the actual cash value (ACV) of your car at the time it was stolen, the insurer will offer you a payout. This ACV is usually calculated based on the make, model, age, mileage, and condition of your car.

3. Calculation of the payout: If you have comprehensive coverage on your car insurance policy, your insurer will pay you the ACV of your vehicle minus any deductible that applies. If you owe more on your car loan or lease than this payout amount, you’d be responsible for paying off the remaining balance, unless you have gap insurance.

4. Gap insurance is applied: If you have gap insurance, it would now cover the difference between the insurance payout and the remaining balance of your loan or lease. Keep in mind, gap insurance typically won’t cover the deductible from your comprehensive coverage, and it doesn’t cover any overdue payments or penalties associated with your loan or lease.

Gap insurance protects you from having to pay out of pocket for a vehicle that’s been stolen and not recovered, provided you still owe more on your loan or lease than the vehicle is currently worth. However, once your loan balance drops below the value of the car, gap insurance is no longer necessary.

Also, remember that gap insurance isn’t a standalone policy; it is an add-on coverage that you buy along with your standard auto insurance policy.

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Related Reading: My Car Is Stolen & I Pay On Finance – What Should I Do?

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Your GAP Insurance Choices In The Result Of Car Theft?

There are a few different types of policy you can choose from when taking out Gap Insurance for protection against car theft. These depend largely on how you intend to fund the purchase of your vehicle.

Combined Return to Invoice Gap Insurance

If you paid cash for your vehicle, or paid a sizeable deposit, or if you financed it, Combined RTI Gap cover will pay out the shortfall between the cost of your vehicle and the market value at the point of claim, which is the amount your motor insurer will cover. This is cover that will protect you no matter if you use your vehicle for private use or for business.

Lease/Contract Hire Gap Insurance

If you leased your vehicle or it is under a contract hire agreement, Lease/Contract Hire Gap Insurance will cover you for the shortfall on your lease agreement, after your motor insurer settlement. If, for any reason, you change your vehicle within the first 90 days from the start date, we will also arrange to transfer your cover to your new vehicle without hassle or charge.

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Contact Click4Gap Today!

Want to discuss your personal situation and options to give you peace of mind that you are FULLY covered for any such eventuality of car theft? We are here to help. Call us Monday – Friday, 9am to 5pm on 0208 819 3424 or Email us anytime and we’ll get back to you during office hours.