Buying a car can be an enjoyable experience, from looking at different models to picking out the right spec. However, if the worst happens and your car is stolen or written off, you could really end up out of pocket as well as having no car, therefore it is certainly worth thinking about taking out GAP Insurance.
Guaranteed Asset Protection insurance (GAP) protects your financial interest in your vehicle, whether it’s a new car, second hand or if you already own it.
GAP is designed to give you a bit of extra help to get back on the road by paying out the difference between what you paid for the car and what you may receive from your insurer following a claim - in insurance terms, it’s known as your total loss settlement.
A total loss settlement generally tends to be what your car is worth at the time of the incident, which is likely to be much less than you paid. According to the AA, new cars can lose up to 40% of their value after their first year therefore if you’re buying your car on finance, or through a lease agreement, you’ll be particularly interested in GAP insurance.
Do I really need it?
Here's an example of when GAP insurance comes in handy:
You bought a car a year ago at £15,000 but you needed a loan to buy it. You are then involved in an accident and your car was damaged badly and has been written off.
You make a claim with your car insurance provider, but they only offer you the current market value of your car which is now £10,000 even though you bought it at £15,000 – leaving you £5,000 out of pocket.
GAP insurance takes care of the £5,000 so you are still able to pay your loan.