GAP Insurance: Your complete guide

What is GAP Insurance and do you need it? And which are the best companies for GAP Insurance? We explain all in our complete guide.

What is GAP insurance?

GAP insurance (or Guaranteed Asset Protection insurance) is designed to cover the difference between the value of your car when it is written off, versus the price you paid when you first bought it - or the amount still owed to the finance company.

If your car is written off or stolen, your insurance company will pay you what the vehicle was worth at the time of the incident, so this could be considerably less than what you paid originally due to depreciation.

This is particularly relevant if you bought your car new, as the biggest chunk of depreciation happens in the first three years.

This 'gap' is what GAP insurance will cover, so you can replace the car with an equivalent or pay off any remaining finance.

Changes to the law on selling financial products in July 2023 saw the introduction of Consumer Duty - and as a result many dealers stopped selling GAP Insurance

We're here to explain how GAP insurance works and help you decide if you need it. We'll also help you find the cheapest GAP insurance quotes.

Best GAP Insurance Offers & Discount Codes

ALA GAP insurance - 12% discount. We've arranged a deal on GAP insurance just for honestjohn.co.uk readers. Use the ALA GAP Insurance voucher to receive a great deal.

Motoreasy GAP Insurance. Get 12% Motoreasy GAP insurance by using the discount code: HJ12

Best GAP Insurance companies

This is our pick of the best online GAP insurance companies, so you can compare quotes directly from these providers. Usually these will be cheaper than buying GAP Insurance from a dealer but it's crucial to read the fine print (the dreaded Ts and Cs) so that you are comparing like for like.

ALA

GAP Insurance specialists, ALA Insurance is one of the most recognised names out there when it comes to GAP Insurance. ALA boasts 5 star Defaqto rated policies and claims to be 75% cheaper than buying from a dealer. It covers new, used and pre-reg vehicle and you can pay monthly or annually. ALA says it has a 99% claim payout rate.

How much does ALA GAP Insurance cost?

We've based our GAP Insurance quotes on a 3 month old Ford Fiesta with a purchase price of £20,000 bought with finance from a dealer. The price is for 3 years cover.

We've made a lot of assumptions and your circumstances will be different - so make sure you check to see what it will cost you.

Cover Total Cost (3 years)
Vehicle Replacement Plus £213.21
Back to Invoice Plus £131.04

What cover does ALA offer?

  • Vehicle Replacement Plus covers a replacement to match the same vehicle originally bought.
  • Back To Invoice Plus covers the full price you paid for your vehicle.
  • Contract Hire Plus will cover up to 100% of outstanding rental payments for the vehicle and cover any shortfall in the market value settlement provided by the insurer.
  • Agreed Value GAP Insurance will pay the difference between your comprehensive insurer’s settlement and the Glass’s Guide retail value of your vehicle at the time your policy is purchased.

Motoreasy

Another of the most recognised names for GAP Insurance, Motoreasy actually offers a whole range of products from warranties to breakdown cover. When it comes to GAP Insurance it offers cover on cars less than 10 years old and with less than 100,000 miles recorded since new. It also covers vans under 3500kg. Getting a quote does require creating an account.

How much does Motoreasy GAP Insurance cost?

We've based our GAP Insurance quotes on a 3 month old Ford Fiesta with a purchase price of £20,000 bought with finance from a dealer. The price is for 3 years cover.

We've made a lot of assumptions and your circumstances will be different - so make sure you check to see what it will cost you.

Cover Total Cost (3 years)
Return to Invoice £160.62

What cover does Motoreasy offer?

  • Return to Invoice covers the difference between your insurer’s payout and either the price you originally paid or the amount needed to settle your outstanding finance balance.
  • Return to Value will cover the difference between your insurer’s payout, based on current value, and the original value
  • Contract Hire & Lease covers up to 100% of any outstanding rental payments on a vehicle

GAPInsurance.co.uk

Promoting itself as the UKs original online GAP insurance provider, GAPInsurance.co.uk has been around since 2004 and offers GAP Insurance for new and used cars. It says that it has saved customers an average of £243 on GAP Insurance compared to buying from a dealer. It also offers excess protection insurance which covers both the voluntary and compulsory excess on your insurance policy.

How much does GAPInsurance.co.uk cost?

We've based our GAP Insurance quotes on a 3 month old Ford Fiesta with a purchase price of £20,000 bought with finance from a dealer. The price is for 3 years cover.

We've made a lot of assumptions and your circumstances will be different - so make sure you check to see what it will cost you.

Cover Total Cost (3 years)
Replacement GAP £270.90
Invoice GAP £164.77

What cover does GAPInsurance.co.uk offer?

  • Replacement GAP insurance pays the difference between the insurer's valuation and the cost of replacing your vehicle with a brand new equivalent.
  • Invoice GAP covers the difference between the insurer's valuation of the vehicle and the original invoice price.
  • Contract Hire GAP covers the difference between the insurer's valuation of the vehicle and the settlement figure of your contract hire agreement.
  • Top-Up GAP in the event of your vehicle being written off through accident, fire, theft, or flood, this pays an additional 25% of what your insurer paid out.

GAPInsure.com

GAPInsure.com is another brand you're sure to come across when searching for GAP insurance and its slick website certainly explains things well. It's also very simple to get a quote. GAPInsure.com offers cover on new and used cars (up to 10 years old with 80,000 miles) as well as light commercial vehicles up to 3500kg and motorbike GAP insurance. 

How much does GAPInsure.com cost?

We've based our GAP Insurance quotes on a 3 month old Ford Fiesta with a purchase price of £20,000 bought with finance from a dealer. The price is for 3 years cover.

We've made a lot of assumptions and your circumstances will be different - so make sure you check to see what it will cost you.

Cover Total Cost (3 years)
Return to Invoice Advance £250.97

What cover does GAPInsure.com offer?

  • Return to Invoice Advance covers the difference between your insurance pay out and the invoice value.
  • Contract Hire GAP Insurance will cover the difference between your car insurance and the outstanding amount on your contract hire/lease agreement.

Direct GAP

With a host of five star reviews on TrustPilot and an impressive score of 4.8, Direct GAP is clearly doing something right when it comes to customer service. It says it can save customers up to 75% of the cost of Gap Insurance offered by dealers with cover starting at £69. We liked its simple to use site and was the easiest we found for getting a quote.

How much does Direct GAP Insurance cost?

We've based our GAP Insurance quotes on a 3 month old Ford Fiesta with a purchase price of £20,000 bought with finance from a dealer. The price is for 3 years cover.

We've made a lot of assumptions and your circumstances will be different - so make sure you check to see what it will cost you.

Cover Total Cost (3 years)
Vehicle Replacement+ £199
Return to Invoice+ £159

What cover does Direct GAP offer?

  • Return to invoice+ pays the difference between the insurers settlement and either the invoice price or the amount outstanding on finance.
  • Vehicle replacement+ covers the difference between the insurers settlement and the cost of a replacement vehicle matching the original specification.
  • Contract Hire GAP pays the difference between the insurers settlement and the outstanding finance balance.

InsuretheGap.com

Part of the giant Zurich Insurance family, InsuretheGap.com was launched in 2015 and offers cover for cars, vans and motorbikes. It covers up to the market value of £150,000 and unlike many GAP Insurance providers, there are no restrictions on performance vehicles. It had the cheapest quotes for our Ford Fiesta.

How much does InsuretheGap.com cost?

We've based our quotes on a 3 month old Ford Fiesta with a purchase price of £20,000 bought with finance from a dealer. The price is for 3 years cover

We've made a lot of assumptions and your circumstances will be different - so make sure you check to see what it will cost you.

Cover Total Cost (3 years)
Vehicle Replacement GAP £172
Return to Invoice £142

What cover does InsuretheGap.com offer?

  • Vehicle Replacement GAP covers what it will cost to buy a replacement vehicle of the same age, mileage and spec.
  • Return To Invoice GAP covers the difference between what your motor insurer pays you and what you originally paid for the vehicle.
  • Finance GAP pays the difference between the current market value of the vehicle and the net balance payable to the finance company.
  • Combined Total Loss GAP pays the difference between what the insurer pays you and what you originally paid for the vehicle (or outstanding finance).
  • Contract Hire GAP covers the difference between the insurance pay out and any outstanding finance owed.

Where to compare GAP Insurance quotes

As with any insurance, it's easy to get GAP Insurance quotes from a variety of providers in one go by using a comparison site. If you create an account you can save quotes and come back to them at a later date - handy if you're using several comparison sites at once.

Not all comparison sites quote for GAP Insurance however. Our favourites we recommend are:

MoneySupermarket 

GoCompare

Confused

Do I need GAP insurance?

GAP insurance is not essential: it depends on your financial circumstances and if you have purchased or leased your car.

If you bought your car outright, your insurer would pay out the market value of your car, so you would have the funds to replace it with one of a similar age and mileage, but if you wanted a new replacement or equivalent at the time you first bought it, GAP insurance would make up the shortfall.

However, if you bought your car on finance and are still paying it off, or leased it, you could owe more to the finance company than the amount that your insurer will pay you. That means you would either have to buy a replacement car and still have to pay the finance company, or give your payout to the finance company, still owe them an amount and have no car to show for it.

This is where GAP insurance can help. However, if you car insurance policy includes new car replacement cover then it is unlikely to be of use, and if you own an older car then GAP insurance is less likely to be good value.

Are there different types of GAP Insurance?

The are several different types of GAP insurance widely available. In all cases, the GAP insurance provider tops up the difference between what your car insurance company pays out and what you actually need.

Finance GAP insurance is the most popular and is designed to protect a car owner against losses if their car is written off but there’s still outstanding finance on it.

Return to invoice GAP insurance (or RTI) makes sure that for a car you own outright you get back the full price that you paid for it.

Contract hire GAP insurance is available if you lease a car rather than buy one. The current market value of the vehicle is covered by your car insurer and the gap cover will pay any remaining payments owed on the lease.

Combined total loss GAP insurance pays the difference between your motor insurance payout and either what you paid for the vehicle or any outstanding finance balance.

How to find the best GAP insurance

As with any kind of insurance, the best way to get a good deal is to shop around. Car dealers can offer you GAP insurance, but due to the introduction of Consumer Duty legislation, designed to ensure car buyers are offered greater protection and are given additional support, some dealers are choosing to no longer offer this product.

Before you go looking for a good deal on GAP insurance, it is worth taking time to consider a few factors.

Check your insurance policy

Some insurance policies offer an 'old for new' clause, particularly if your car is less than 12 months old, so check to see if your policy offers this as it would avoid the need for GAP insurance.

Choose the right policy for you

If you are buying a car on finance, then finance GAP insurance will likely meet your needs as it ensures it covers any shortfall between your insurance payout and the amount outstanding on finance.

If you owned the car outright then return to invoice GAP insurance will allow you to replace it with a new equivalent.

Do your homework

You can make an estimate on how your car will depreciate in the coming months and years by looking at used prices and compare this to how much you will owe your finance company over the same period. If you can cover this shortfall yourself then GAP insurance may not be necessary, but if not GAP insurance could help should the worst happen.

Shop around

A car dealer offering GAP insurance is convenient, but is unlikely to deliver the best deal available. Try brokers and GAP insurance companies, compare quotes and look at all the options before signing up.

Read the small print

While the new Consumer Duty legislation means anyone selling a financial product has to be clear about the terms and conditions, never assume that every aspect has been covered. Take the time to read all the paperwork carefully and don't hesitate to ask if something is not clear.

What if I think my GAP insurance was mis-sold?

Car dealers can pocket a healthy commission selling GAP insurance at an inflated price – sometimes up to 10 times the policy’s worth, according to one expert we spoke to.

Therefore, it’s not unknown for some to use morally dubious tactics to sell it to new car buyers. If you think you’ve been mis-sold GAP insurance, help is at hand. Below are the main types of GAP insurance mis-selling:

Deception

At the most malevolent end of the spectrum, it could be that you’ve had a GAP policy bundled into your finance agreement without your knowledge. It’s more likely that the mis-selling was subtler than that, but it’s worth checking the terms of your car finance agreement anyway.

Forceful selling

In order to make additional commission, some dealers claim that a finance agreement cannot be taken out unless GAP insurance is applied. This is simply not true, and you’ve been mis-sold. As with other types of insurance, this also applies to other GAP providers using pressure tactics to make unnecessary sales.

Not correctly described

This often only manifests itself as a claim is being made, but it can be the case that a salesperson makes exaggerated claims about cover – that it guarantees to cover the entire finance shortfall, for example, when it’s actually very limited. Buyers must be told about all the limitations, restrictions and terms of the policy at the point of sale. If not, there may be a legitimate mis-selling claim.

Incorrect/unsuitable policy

On occasion, a buyer can be sold the wrong type of GAP policy – you think you have finance GAP insurance, when in fact you’ve been sold return to invoice insurance, for example.

Restrictive policy

The 1999 Unfair Terms in Consumer Contracts Regulations is designed to ensure that all insurance agreements are reasonable – that the terms aren’t so restrictive or unfair that the policy could never actually pay out. If you feel your GAP cover has too many limitations, you could have a mis-selling claim.

Car dealers can pocket a healthy commission selling GAP insurance at an inflated price – sometimes up to 10 times the policy’s worth, according to one expert we spoke to. Therefore, it’s not unknown for some to use morally dubious tactics to sell it to new car buyers. If you think you’ve been mis-sold GAP insurance, help is at hand. Below are the main types of GAP insurance mis-selling:

Deception

At the most malevolent end of the spectrum, it could be that you’ve had a GAP policy bundled into your finance agreement without your knowledge. It’s more likely that the mis-selling was subtler than that, but it’s worth checking the terms of your car finance agreement anyway.

Forceful selling

In order to make additional commission, some dealers claim that a finance agreement cannot be taken out unless GAP insurance is applied. This is simply not true, and you’ve been mis-sold. As with other types of insurance, this also applies to other GAP providers using pressure tactics to make unnecessary sales.

Not correctly described

This often only manifests itself as a claim is being made, but it can be the case that a salesperson makes exaggerated claims about cover – that it guarantees to cover the entire finance shortfall, for example, when it’s actually very limited. Buyers must be told about all the limitations, restrictions and terms of the policy at the point of sale. If not, there may be a legitimate mis-selling claim.

Incorrect/unsuitable policy

On occasion, a buyer can be sold the wrong type of GAP policy – you think you have finance GAP insurance, when in fact you’ve been sold return to invoice insurance, for example.

Restrictive policy

The 1999 Unfair Terms in Consumer Contracts Regulations is designed to ensure that all insurance agreements are reasonable – that the terms aren’t so restrictive or unfair that the policy could never actually pay out. If you feel your GAP cover has too many limitations, you could have a mis-selling claim.

What should you do if you have a GAP Insurance mis-selling claim?

Step 1: Approach the dealer principal of the dealership that sold you your car, or the company that sold you the GAP insurance if you bought it separately. Be sure to write or email with your complaint, so that all correspondence is on record. Outline your complaint clearly and methodically, explaining the grounds on which you believe your GAP was mis-sold.

In a best case scenario, the seller will work with you on a solution – and companies are legally required to reply to you in writing to acknowledge your claim. Because life is rarely that simple, you have other options.

Step 2: Approach the Citizen’s Advice Bureau if you feel you need some help or representation when approaching the mis-seller.

Step 3: The Financial Ombudsman website has more detailed advice on the law regarding GAP sales and what you can do. The Ombudsman has a helpline that consumers can contact to talk through matters too (0800 023 4567), and can help you make a claim.

Step 4: For more serious cases, the Financial Conduct Authority exists to regulate companies that sell financial services. It does not pursue individual claims, but has plenty of advice and a consumer helpline: 0800 111 6768. 

Does the law protect me?

In order to make buying a car from a dealer fairer, and to stop GAP insurance becoming just another 'add on', the FCA changed the rules on how GAP Insurance can be sold from 1 September 2015.

The seller must explain exactly how much the policy will cost, what it covers, and how long the policy will last.

What's more, dealers selling GAP insurance are not allowed to sell it at the same time as the car is sold. There must be a buffer of two clear days between you being given the cost of the car and the day you can buy GAP insurance.

This is to give you time to think about whether it's right for you, to shop around and not to sign up to something without fully realising what it is. If you think you have been mis-sold GAP insurance, our advice below gives details on what you can do.