For most of us, a discussion around general asset protection (GAP) insurance goes no further than the car salesroom, often dismissed as an optional extra you don’t need. It can, however, prove great value as GAP insurance covers the difference between the value you paid for your vehicle and its present value. It’s mainly used in the new car market and comes in various different forms.
With a brief rundown of what general asset protection insurance is and what types are available, you can decide whether seeking GAP cover makes sense for you.
What Is GAP Insurance?
Depreciation on new cars is huge. In the first year alone, you can expect to lose 15-35% of your car’s value. By year three, you can easily be over 50% down on the original sum you paid.
If you ever face the misfortune of completely writing off your car or having it stolen, you’ll only be able to claim back the present value of your vehicle through conventional insurance. With depreciation on new cars so harsh, this means you can lose tens of thousands in equity against your car.
If you are covered by GAP insurance, the value gap between your car’s present value and the price you paid will be covered by your provider. GAP insurance makes a lot of sense for new car owners who are wary of heavy depreciation and usually costs a few hundred pounds for several years cover.
Different Types of GAP
If the basic premise of GAP insurance sounds like it might be for you, you need to then consider the different options available in the market.
Finance GAP is suitable for those on monthly car finance plans and is often a part of wider types of GAP cover. If you’re on a finance plan and write off your vehicle, you still have to pay the outstanding balance on your loan, which won’t be covered by a conventional pay out.
Finance GAP insurance will bridge the gap between your compensation and your remaining loan payments, taking an unwanted financial strain off your mind.
Negative Equity GAP
Negative equity GAP is the next step up from Finance GAP and is useful for users who have part-exchanged a previous finance plan vehicle onto a new plan with debts still outstanding.
If the amount you’ve borrowed is higher than the cost of your current car, negative equity GAP will cover the additional older debt as well as the newer loans.
Return to Invoice GAP
Aligning with the traditional understanding of what GAP insurance is, return to invoice GAP will top up the conventional insurance pay-out to the original value of your vehicle.
For example, if you bought a new vehicle at £10,000 and its value has since dropped to £6,000, your normal insurance pay-out in the case of a write off would be £6,000. Return to invoice GAP covers the extra £4,000 so you can recover your full initial outlay.
Return to Value GAP
Very similar to return to invoice GAP, return to value simply tops up your pay-out to the market value of the car when you first purchased it, as opposed to the exact price you paid.
Vehicle Replacement GAP
Instead of receiving the full amount your vehicle is worth, vehicle replacement GAP will pay the difference between your insurance pay-out and the cost of replacing your vehicle with a new model.
Finally, if you didn’t buy or finance your vehicle but leased it, lease GAP will help to pay the rest of your leasing contract plus any fees associated with early cancellation of the agreement.
If you think one of these policies would suit you, you can find all of these variations of GAP cover through trusted and reliable providers like ALA.