What is Gap Insurance?

Gap Insurance or GAP (Guaranteed Asset Protection) offers an automotive owner extra protection in the event of their vehicle being written off or stolen. Basically it is a type of insurance that pays the difference between what you own and what the vehicle is worth. For example, with a gap insurance policy, if a person were to purchase a vehicle that costs £20,000, each subsequent day, its value would decrease. This is normal practice and is commonly the case with most, if not all vehicles.

Follow up:

So, let’s say the driver of this vehicle was then involved in an unfortunate collision with another driver, which results in the vehicle being a total write off. At that time, the car insurance provider will pay out an insurance premium to driver (depending upon the type of car insurance cover), which is based upon the current value of the car. It may be then that at the time of the crash, the car was worth £15,000, which is £5,000 less than what it was bought for (due to depreciation).Therefore, the car insurance provider will pay out £15,000. However, with a gap insurance policy in place, the depreciated £5,000 would also be paid out to the vehicle owner meaning that they would get paid a total premium equal to the original value of the purchase. The same applies if the car is stolen.