Don’t Get Left in the Gap: Essential Questions Before Buying Gap Insurance

When looking into purchasing GAP (Guaranteed Asset Protection) insurance, it is crucial to thoroughly investigate and ask several key questions to make a well-informed decision. Understanding what the policy covers, the claim limit, and whether your vehicle is eligible are essential starting points. 

Additionally, it’s important to consider the duration of the policy, any exclusions that may apply, how the GAP insurance interacts with your existing car insurance, and the overall cost and payment structure. You should also inquire about the possibility of transferring the policy, the process involved in making a claim, if there’s a cooling-off period, and who underwrites the policy. 

Here are some more details about these questions and why they are important.

1. What Is Gap Insurance?

GAP insurance, or Guaranteed Asset Protection insurance, is a type of insurance product in the UK that is specifically designed to cover the ‘gap’ between the actual cash value of a vehicle and the amount owed on it or its replacement cost in the event of a total loss. This is particularly relevant in cases where a car is written off or stolen.

2. What Does the Policy Cover?

In the UK, there are several different types of GAP (Guaranteed Asset Protection) insurance, each designed to serve specific needs and scenarios related to vehicle ownership and financing. Here’s an overview of the main types:

Return to Invoice GAP Insurance (RTI)

This is one of the most common types of GAP insurance. It covers the difference between the insurance pay out (the current market value of the vehicle at the time of loss) and the original purchase price of the vehicle. It’s ideal for people who want to ensure they can recover what they originally paid for the vehicle.

Vehicle Replacement GAP Insurance

This type of GAP insurance covers the difference between the insurance pay out and the cost of replacing the vehicle with a new one of the same make, model, and specification (or equivalent if the original model is no longer available). This policy is beneficial if car prices have increased since the original purchase, ensuring the owner can afford a like-for-like replacement.

Finance GAP Insurance

Finance GAP insurance is designed for vehicles purchased with a loan or financing. It pays the difference between the insurance pay out and the outstanding balance on the finance agreement. This is crucial if the car is written off or stolen and the settlement from the standard car insurance doesn’t cover the remaining debt.

Lease GAP Insurance

Similar to finance GAP insurance, lease GAP insurance is tailored for leased vehicles. It covers the gap between the insurance pay out and the amount you still owe to the leasing company. This can include covering any outstanding rental payments and potentially the cost of getting into a new lease agreement.

Contract Hire GAP Insurance

Specifically for vehicles on contract hire or lease agreements, this insurance covers the difference between the insurance pay out and the amount required to settle the contract. It’s particularly important for leased vehicles where you are not the owner and might have significant financial obligations in case of a total loss.

Return to Value GAP Insurance

This is less common and covers the difference between the insurance pay out and the vehicle’s market value at the time the GAP policy was purchased. This is useful if you buy the GAP policy sometime after purchasing the vehicle, as it relates to the vehicle’s value at the time of taking out the GAP insurance, not its original purchase price.

Each type of GAP insurance has its specific applications and benefits, and the best choice depends on individual circumstances, such as how you’ve acquired the vehicle (purchase, finance, lease), the depreciation rate of the vehicle, and your financial situation. It’s crucial to read the terms and conditions of the policy carefully to understand what is covered and ensure it aligns with your needs.

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Related Reading: Worried About Depreciation? Get Gap Insurance

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3. What is the Claim Limit?

Check the maximum amount you can claim under the policy. This is important to ensure it matches the potential shortfall you might face.

4. Is My Vehicle Eligible?

Confirm that your vehicle is eligible for GAP insurance. Some policies have restrictions based on the age, type, or value of the vehicle.

5. What is the Policy Duration?

Understand how long the policy lasts and whether it matches the period you need coverage for, particularly if you have a finance agreement in place.

6. What are the Exclusions?

Familiarise yourself with any exclusions or circumstances where the policy would not pay out, such as certain types of damage or loss.

Common Exclusions

Common exclusions in GAP insurance policies in the UK vary by insurer, but there are several typical ones that policyholders should be aware of. Firstly, most GAP insurance policies will not cover any amount that is deducted by the main car insurance company, such as policy excess, unpaid premiums, or any depreciation in value due to damage that occurred prior to the total loss. 

Additionally, these policies often exclude non-standard vehicle modifications unless specifically agreed upon at the policy’s inception. Vehicles used for certain purposes, like racing, hire or reward, or as part of a business fleet, may also be excluded. Importantly, if the car is stolen and the keys are left in or on the vehicle, or if there’s evidence of negligence, the claim might be rejected.

Another common exclusion is the time limit for making a claim, which is a crucial aspect to consider. Most GAP insurers require that a claim be made within a specific time frame after the vehicle has been declared a total loss by the main car insurance company. Failing to meet this deadline can result in the claim being denied. 

Furthermore, GAP insurance usually does not cover negative equity carried over from a previous vehicle finance agreement. This means if you have rolled over debt from an old car into the finance for a new car, this additional amount may not be covered. 

Lastly, policies typically exclude any vehicle that is not covered by a comprehensive car insurance policy, as GAP insurance is designed to work alongside comprehensive coverage. Understanding these exclusions is crucial for policyholders to ensure they are adequately covered and to avoid surprises at the time of a claim.

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Related Reading: The Least Depreciating Cars For New Drivers In The UK: Get The Best Value For Money

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7. How Does It Work with My Car Insurance?

Know how the GAP insurance works in conjunction with your standard car insurance policy. For instance, some GAP policies require that you have fully comprehensive car insurance.

8. What is the Cost and How is It Paid?

Ask about the total cost of the policy and whether it’s a one-off payment or paid in instalments. This will help you budget accordingly.

9. Can I Transfer the Policy?

If you change vehicles before the policy expires, check if you can transfer the GAP insurance to your new vehicle.

10. What is the Process for Making a Claim?

Understand the claim process, including any time limits for making a claim after an incident.

11. Is There a Cooling-Off Period?

Check if there’s a cooling-off period during which you can cancel the policy for a full refund, in case you change your mind.

12. Who is the Underwriter?

Know who underwrites the policy, as this can affect the reliability and ease of claiming.

13. Are There Any Additional Benefits or Features?

Some GAP insurance policies offer additional benefits or features, such as coverage for accessories or contributions towards a replacement vehicle.

It is imperative to meticulously read through the terms and conditions of the policy before finalising your decision. Understanding every aspect of the policy is crucial, and if there are any points that seem unclear or raise questions, you should not hesitate to reach out to the insurer for further clarification. 

Ensuring that you have a comprehensive understanding of all the policy details will help in making a more informed and confident decision regarding your insurance choice.

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Related Reading: Click4Gap Guide to Buying a New Car in the UK

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Need Gap Insurance?

There are a few different types of policy you can choose from when taking out your Gap Insurance cover with Click4Gap. These depend largely on how you intend to fund the purchase of your vehicle. So what car Gap Insurance is right for you?

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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Related Reading: The Consequences of NOT Having Click4Gap Gap Insurance