Gap insurance

Gap insurance might be useful for you if...

• 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'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 Cheap car insurance guide for tips on getting a cheap general car insurance policy.

• 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. On average, according to vehicle valuation company Cap HPI, a three-year-old car's value will drop 14% in the first year, 24% in the second and 33% in the third year. This is significantly less than the 60% average fall for new cars in the first three years.
  
  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.