Guaranteed Asset Protection is more commonly known as GAP Insurance. Think of the asset as your car, and then Guaranteed Asset Protection is kind of self-explanatory. GAP insurance protects the asset (your car) in the event of the vehicle being written off. This type of insurance covers the amount you paid for your car and the amount your car insurance pays out should your car be written off. GAP insurance is a separate policy from your car insurance policy, and unlike car insurance, it is not a legal requirement. However, it can be beneficial for many drivers.
Find out more about how GAP insurance works below.
What is GAP Insurance?
Guaranteed Asset Protection is a type of insurance policy which protects you if your vehicle is written off. It is a policy which covers the loss in value if your car is written off, stolen or not recovered. This type of policy helps to bridge the gap (see what we did there?) between the value of your car and what the insurance company would pay out. This helps to avoid any hefty payout should something bad happen to your car. Without GAP insurance, your insurance company may only pay out the current ,market value of the car, not how much you originally paid for it. So having a GAP insurance policy in place can be beneficial.
When does GAP insurance make sense?
GAP insurance could be considered if you meet any of the following:
- You’ve bought a car which depreciates quickly.
- You’ve financed a car and only made a small deposit contribution.
- You’ve got a new car with rolled over negative equity.
- You’ve leased a car.
- You’ve financed a car over a long loan term.
What does GAP insurance cover?
Guaranteed Asset Protection can cover you in a number of situations. It is usually used to pay the difference between the amount you paid for your car and the amount the insurance company pays out if your vehicle is written off, stolen or non-recoverable. If you didn’t have GAP insurance in place and crashed your car, your insurance company would only payout the current market value of your car. If you have a car which is new and has depreciated quickly, you’d be out of pocket. GAP insurance helps to cover the difference between its value when you first bought it and what the insurance company pays out.
A GAP insurance policy can also be used to cover any money you owe on a financed car when the payout from your insurance company is not enough to pay off the balance. Most car finance deals last between 4-5 years, so it can be worth considering taking out.
What happens when your car on finance is stolen?
Can you take out GAP insurance at any time?
You’ll usually be offered GAP insurance from the dealer when you’re buying a new car. Guaranteed Asset Protection policies can be taken out on both new and used cars. But, they can be especially beneficial for brand-new cars because they tend to depreciate quicker. To take out a GAP insurance policy on a used car, there can be restrictions like the car has to be under 10 years old and have less than 100,000 miles on the clock. You don’t have to take out the policy there and then with the dealership and can apply for GAP at any time during the first year of ownership. After a year has passed, your options may be limited.
Is GAP insurance worth it?
You don’t need to have GAP insurance, as it’s not a legal requirement. However, it can be beneficial in a few situations. The purpose of a GAP insurance policy is to bridge the gap between how much you bought the car for and how much the insurance pays out if it’s written off. A GAP insurance policy can be a good idea if you’re buying a car that depreciates quickly, such as a brand-new car. It can also be a good idea for anyone financing a car or getting a car on lease. This is because it can help pay off the finance if your car is stolen, written off or non-recoverable.
Where to get GAP insurance?
If you’re buying a new car, you’ll probably be offered GAP insurance from the dealership. It can be easy to set up and in some circumstances can be added to your finance agreement. However, you’re not obliged to buy GAP insurance from the dealership and can hunt around for your own. There are plenty of online GAP insurance comparison sites such as Go Compare or MoneySuperMarket. It can be a good idea to sort your GAP insurance at about the same time you are buying a new car, as many insurers only give you a year of buying the car to sort your GAP policy.
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