Gap insurance

If you aren't bothered by your car's depreciation then there's not a lot of point in buying gap insurance. Your car insurance will pay out for a replacement car so you'll get a car that is like-for-like for what you had when it was written off or stolen (see our Cheap Car Insurance guide for tips on getting a cheap policy), so the only benefit of gap is that you'll get back the original amount you paid.

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 won't need gap insurance.

If you bought a used car like the 9.7 million people who did in 2014 (compared to just 2.5 million splashing out on a new car, according to British Car Auctions), 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 CAP, 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.

It might be useful for you if...

Gap insurance may be worth buying for a few reasons. Here we list the main ones...

If you're dead set on getting a brand spanking new car if yours is written off 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.