The Difference Between GAP Insurance and Full Coverage
GAP insurance, or Guaranteed Auto Protection insurance, is a type of insurance used to reimburse a car owner when the payment for a total loss is less than the initial cost or the outstanding loan balance. But, do you actually need GAP insurance when you already have a full coverage insurance policy in place?
Is GAP insurance full insurance?
No, GAP insurance is not full insurance, it is an additional policy that sits alongside your standard insurance policy.
GAP insurance is designed to bridge the gap between what your standard insurance policy pays out in a claim and the outstanding finance left on the vehicle.
What is the difference between standard vehicle insurance and GAP insurance?
Standard vehicle insurance will cover the cost of replacing or fixing your car in the event of an accident where it is damaged or stolen, whereas GAP insurance covers you in the event of a total loss for the difference between what the insurance company will pay out, and the outstanding finance amount once this payment has been made.
What is the difference between GAP insurance and full coverage?
Full coverage can usually be defined as the highest level of insurance you can have, covering you for if your car is involved in an accident, as well as coverage for fire and theft.
However, like with standard insurance, GAP insurance will only cover the GAP between what your insurance will pay out if your car is damaged or stolen and the outstanding finance amount.
GAP insurance is usually taken out on brand new, leased or PCP cars in which there would be a significant amount of money lost if the car was written off or was deemed to be a total loss. Full comprehensive cover can be used on any vehicle.
To summarise, full comprehensive coverage will cover damage to your vehicle, damage from a collision, injuries to others, theft, fire and natural disasters. GAP insurance covers the difference between what your car is actually worth and the amount the insurance company will pay out in the event that the vehicle is written off.
Should I get GAP insurance if I have full coverage?
Most fully comprehensive insurance policies will offer “new car replacement” during the first 12 months for brand new cars. However, you can usually only apply for GAP insurance within the first few months of owning a new car due to the rate in which the value of new cars depreciates.
Whether you choose to get GAP insurance or not is completely up to your discretion. You should always check first that your full coverage does include a new car replacement if it is written off. Having GAP insurance will simply give you the assurance that you won’t be at a financial loss if something were to happen to the car a year after owning it.
When do you need GAP insurance?
There are two scenarios when GAP insurance may be useful for you:
- If you have bought a brand new car.
If you’re dead set on getting a brand new car if yours is written off or stolen, then GAP insurance may be right for you. For example, if you pay £30,000 for a new car, and just over a year later it is written off, your car insurer may pay out £18,000, which is what it would be worth at the time.
If the outstanding finance is £24,000, GAP insurance would pay the difference between the two amounts. You owe money to a finance company. - This is because if you’ve bought a car through finance and it’s written off or stolen, although your car insurer will pay out its value at the time, you will still have to pay off the remaining balance.
If you crash or the car is stolen, you still have to pay back the whole loan; but, if you had GAP insurance it would pay off the loan, meaning you’re not left paying for a car you no longer have.
