Introduction to GAP Insurance

Introduction to GAP Insurance


Owning a car can be costly, especially when something goes wrong. Even when something doesn’t go wrong, there are still added costs to factor in, including car insurance, car tax and MOTs.

GAP insurance is something that might not always be considered, especially if you are used to purchasing a second hand car.

What is GAP Insurance

GAP (Guaranteed Asset Protection) Insurance is designed to cover you if your car is stolen or written off and your insurance company only pays you the value the car is worth at the time.

Let’s say you paid £17,000 for your car when it was brand new, but your car is written off just 18 months later, your insurance company will agree to pay out £12,500. You then want to purchase another new car to replace the one that was written off, but now you only have £12,500 to put towards a new car, which isn’t likely to be enough.

The GAP insurance will pay the difference between the £12,500 and the £17,000 you originally paid, meaning your vehicle’s value won’t be an issue in the event of a write off or if your car is stolen.

There are different types of GAP Insurance and with the likes of ALA, you can benefit from:

Is GAP Insurance optional?

GAP Insurance is not a requirement, but does offer peace of mind to you as a car owner, especially if you rely on your vehicle to get you to and from work.

Whilst you can still purchase another vehicle to the same value as the one that was stolen or written off, it will likely mean you need to purchase a second hand car rather than a brand new car.

If you have taken out Comprehensive car insurance, your provider will most likely cover the cost to replace your brand new vehicle within the first 12 months if your car is written off or stolen.

In 2021, we saw a surge in used car prices too which means you could end up paying more for a second hand car than you originally paid for your brand new one.

What GAP Insurance covers

GAP Insurance will only cover you in certain circumstances, so it’s important to know this before taking out a policy.

Your car is written off or stolen

GAP Insurance will only pay out if your car is stolen or written off, but not in other circumstances. If your car can be fixed, your insurance company will deal with the repairs.

Your Contract Hire agreement

If you are currently on a Contract Hire agreement, you can opt for GAP Insurance that will cover any remaining payments you owe on the car (if there isn’t an option to purchase the car).

When not to consider GAP Insurance

Purchasing GAP Insurance isn’t for everyone and can be a costly addition if you don’t really require it.

You have made modifications to your car

You could still consider GAP Insurance but you should understand that you will not be insured for the modifications you have made (it will only apply to factory specification).

You don’t plan on buying a new car

In the event that your car is written off or stolen, you may decide not to purchase another brand new car, but instead opt for a similar used car so the insurance payout should cover what you need.

You don’t have a new car

GAP Insurance is best suited to new cars as the value depreciates much quicker than a user car, so you can often lose out more if your car is written off or stolen within those first two years.

You can still take out GAP Insurance on a used car, but you might find the value doesn’t depreciate as quickly anyway.

Where to purchase GAP Insurance

You can arrange GAP Insurance with ALA, by entering your registration details and a bit of information about what you want to insure.

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