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Gap insurance
How it covers your car & whether you need it
The insurance regulator, the Financial Conduct Authority (FCA), has now given the go-ahead for some (not all) providers to sell gap insurance again, after it paused sales having found that some firms were not providing fair value to their customers consumers. This guide explains how gap insurance works, gives the pros and cons to help you decide whether you need it, then what you need to do to find the cheapest policies.
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What is gap insurance?

It's a fact of life that if you buy a brand new car, its value drops by about a third as soon as you drive it off the forecourt. Its value will then fall by about 60% over three years.
If the car is written off or stolen, your car insurance provider will pay out what it's worth at the time – so you're likely to get less from the insurance company than you paid when you bought it, especially if it's brand new. This means when you're getting a replacement car there's a 'gap' between the amount your insurer pays and the amount you'd need to pay to buy that car again brand new (or a similar new model).
If you choose to buy gap (guaranteed asset protection) insurance, this is the 'gap' it covers and is easily available via standalone providers – and policies are typically priced between £100 and £300 for three years of cover.
Dealerships used to sell it at inflated prices but after an investigation by the Financial Services Authority, due to concerns that the cover they offered was failing to provide fair value to some consumers, it has a put a stop to it.
However, gap insurance isn't essential as your car insurer should ALREADY pay out its value for a replacement car of a similar age and condition. Gap insurance is essentially there if you've a finance deal and would owe more to the finance company than you'd get from the insurer.
What does gap insurance cover?
There are three main types of gap insurance, and what it covers depends on which one you buy:
- 'Back to invoice' gap insurance.
This pays you the difference between what your car insurer will pay out in the event of your car being written off or stolen and the original amount you paid for it OR the amount you owe to a car finance company.
- 'Vehicle replacement' gap insurance.
This pays you the difference between what the insurer will pay you and what you would pay if you bought the car today brand new, or if it was a used car, how much it was when you originally bought it.
- 'Contract hire' gap insurance.
This is only available for those who lease their car, with no option to buy it. The current market value of the car will be covered by your car insurer and the gap cover will pay any remaining payments owed on the lease.

Like all insurance policies, there are a number of exclusions. Here are the most common ones you find with gap insurance:
- You need to have fully comprehensive car insurance, so won't be covered if you only have a third-party insurance policy.
- It will only pay out if your car is stolen or a total write-off, as judged by the insurance company.
- It won't pay you for any deductions made by your car insurance company. For example, if it lowers the sum it pays you because you've missed a monthly insurance payment the gap insurance policy won't cover this.
- If you've added extras to your car after you purchased it, such as alloys or spoilers, gap insurance won't cover the cost of these if you needed to claim. It will only pay out the gap between what you originally paid and the market value (minus the extras added after you purchased the car).
Should I get gap insurance?

Choosing whether to get gap insurance is optional, so you'll need to weigh up whether the cost is worth it for you.
As we explain above, gap insurance is not essential because your car insurance should pay out for a replacement car of the same age and condition as yours was when it was written off or stolen, so you're not any worse off.
It is common to hear reports that what is paid out by the insurer may not seem fair to the claimant – and can feel worse if the payout amount is not enough to clear the remaining finance on the vehicle. To help decide, here are some key points to help with your decision making...
- You want a brand new replacement car
If you're dead set on getting a brand spanking new car if yours is written off or stolen, you could consider gap insurance. For example, if you pay £30,000 for a new car and 15 months later it's written off, your car insurer will pay out £18,000 (what it's worth at the time).
If you're not happy with the lower amount – even though that's enough to provide you with a like-for-like replacement car – gap insurance may be worth it.
- You owe money to a car finance company
If you have taken out finance to buy the car – for example, a personal loan – you may find gap insurance useful. This is because if you've bought a car this way and it's written off or stolen, although your car insurer will pay out the value it's worth at the time, you're still left paying off the value it was when you first bought it.
If you crash the car or it's stolen, you still have to pay back the whole loan. But if you had gap cover, it would pay off the loan – meaning you're not left paying back money for a car you no longer have.
- You'd be happy with a replacement car that's not brand spanking new
If you aren't bothered by your car's depreciation then there's not a lot of point in buying gap insurance. If your car is stolen or written off, your car insurance will pay out for a replacement – so you'll get a car that's like-for-like. So the only benefit of gap is that you'd get back the original amount you paid. See our How to get cheaper car insurance guide for tips on getting a cheap general car insurance policy.
- Your car's less than one year old and you have fully comprehensive car insurance
Most fully comprehensive car insurance policies offer 'new car replacement' during the first 12 and sometimes even 24 months for new cars, so if yours does and you're still in this period, you usually won't need gap insurance.
- You have a used car (although some with used cars do still buy it)
If you've bought a used car, gap insurance isn't as useful. This is because a used car won't fall in value at the same rate as a new car.
Therefore the gap between what you paid and what the insurer will pay you will be far smaller and the gap policy could be more or less useless.
The cheapest way to buy gap insurance

Gap insurance used to be available in a number of different places and usually sold by dealerships or specialist brokers (it's unlikely you'll be able to get it from your car insurer) but in February 2024 the insurance regulator, the Financial Conduct Authority (FCA), had to intervene as it discovered some gap insurers were not providing fair value to its consumers. This was prominent via car dealerships.
Now the marketplace has changed, the quickest – and usually cheapest – way to get it is via comparison sites. At present, only two of the big comparison sites are offering quotations – though we will add more when they are up and running.
Comparison sites to try
Site | MSE analysis |
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Based on our analysis, MoneySupermarket* provided the most insurer quotations from the FCA approved insurers. |
![]() Gocompare |
Another comparison site to try and compare the prices, and the cover, is Gocompare. |
Broker | More information |
![]() Click4Gap* |
Exclusive 30% discount via our Click4Gap link. When you buy a new policy via this Click4Gap* link, using the code MSEEXCLDISC, you'll get a 30% discount. |
Buy a policy via our ALA link and get 15% off. Use this exclusive ALA Insurance* link and you'll get a 15% discount, up to a maximum of £40 discount. | |
![]() MotorEasy* |
Get 15% discount via MotorEasy – with no maximum discount. Another option is to go via this MotorEasy* link, using the code MSE15, where you'll also get a 15% discount when you buy a policy, and no maximum discount applies. |
Important. Bear in mind that we have little feedback on these, and other firms. If you use one, or you've had a good experience with a company we've not mentioned, please let us know your experiences in our forum discussion.
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How to complain about your insurance provider
The insurance industry doesn't always have the best customer-service reputation and while a provider may be good for some, it can be hell for others. We explain How to claim car insurance in our guide for what you need to do if something happens, but many people report issues with their firm.
Common problems include claims either not being paid out on time or at all, unfair charges, or exclusions being hidden in small print. It's always worth trying to call your provider first, but, if not, then…
You can use free complaints tool Resolver. The tool helps you manage your complaint, and if the company doesn't play ball, it also helps you escalate your complaint to the free Financial Ombudsman Service.
Have your say in our forum!

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