There are a lot of things to consider as a car owner, including what would happen in the event of total loss (an accident, theft, flood or fire damage). If your car is written off by your motor insurance company, you could be forced to pay a significant amount of money for a replacement vehicle or to settle outstanding payments on your finance agreement.
This is where a guaranteed asset protection (GAP) insurance policy can step in. For many car owners, their standard insurance would only pay out for the market value of their car at the point of a claim—not the car’s original purchase price. GAP coverage can bridge this difference, so you wouldn’t be out of pocket if the worst was to happen to your car.
In this article, we will explain the general requirements for all GAP insurance policies, as well as the particular requirements for specific types of GAP insurance.
To qualify for any GAP insurance policy, your vehicle must be registered in the UK and in Glass’s Guide. It must also not be from one of the following manufacturers:
Ferrari
Lamborghini
Maserati
Rolls Royce
Your vehicle must also not be a left-hand drive. Other excluded vehicles include buses, motorcycles, taxis, minicabs, couriers and delivery vehicles, driving tuition vehicles and any rally, competition or off-road vehicle of any type.
There are some obligations that apply to all GAP insurance policyholders. These include providing complete and accurate answers to questions when taking out or amending your policy and making sure you are eligible for cover. The vehicle the GAP insurance is intended for cannot have been previously declared a total loss or write off by your insurer.
The policyholder must be the owner and/or registered keeper of the car, which must have fully comprehensive coverage from a UK-based insurer. GAP insurance does not replace this insurance but works alongside it, so will not pay out if your motor insurer denies your claim.
The requirements for claiming on one of our GAP insurance policies include that you must report your claim within 120 days of your vehicle being declared a total loss. You should also not accept any kind of settlement from your motor insurance provider before you have spoken to your GAP insurer.
To qualify for Back to Invoice Plus, your vehicle must be less than 10 years old and have been owned by you for less than 180 days (or less than 365 days if your car is less than 12 months old and you have new car replacement coverage on your motor insurance).
This policy is for passenger cars valued up to £125,000 and light commercial vehicles (up to 3,500KG-GVW) valued up to £75,000. The vehicle must have been purchased from a VAT-registered dealer and be owned outright or on a Hire Purchase (HP) or Personal Contract Purchase (PCP) contract.
To be eligible for Vehicle Replacement Plus, your vehicle be less than seven years old and be valued at less than £125,000. It must have been collected from a VAT-registered dealer within the last 90 days, and have not covered more than 80,000 miles. This vehicle must be owned outright by you or financed on a HP or PCP agreement.
This policy also covers light commercial vehicles of a value less than £75,000.
Contract Hire Plus GAP insurance is for passenger cars and light commercial vehicles used on a lease or contract hire agreement, with no option to buy at the end of the agreement. You will be eligible for this type of policy if you collected your lease vehicle in the last 365 days, and the vehicle is less than 10 years old and valued at less than £125,000.
This policy is also available with Initial Rental Cover as an optional add-on. This is subject to an additional premium and will enable you to recover your rental deposit up to a maximum of £3,000.
In the event of a total loss, Agreed Value GAP insurance will cover the difference between the Glass’s Guide retail value of your car at the time you buy the policy and your comprehensive insurer’s settlement. This is for cars, pickups and light commercial vehicles purchased from private sellers, or where the original GAP insurance policy has expired. You can also choose this policy if you purchased your vehicle from a dealer but time restrictions mean that you wouldn’t be eligible for cover on a Back to Invoice Plus or Vehicle Replacement Plus policy.
On this type of policy, your vehicle should be less than 10 years old, valued at less than £75,000 and have not covered more than 100,000 miles. Agreed Value GAP cover does not insure accessories or extras that have been fitted by you or a dealer.
Is GAP insurance required for a leased car?
While it isn’t obligatory for you to have GAP insurance on a leased car, it is widely recommended to have it on top of your primary policy. This is because policies like Contract Hire Plus will cover your liability if the car is declared a total loss and help you get a new car without having to worry about any debts from your old agreement.
Is GAP insurance required for the first year of ownership?
GAP insurance isn’t a requirement. Values depreciate more steeply on new cars, but depreciation is cumulative. This means a Back to Invoice Plus or Vehicle Replacement Plus policy would cover more in the third year of ownership than it would in the first year. However, you can take out an Agreed Value GAP insurance policy at any time.
How does GAP insurance work after a car is written off?
If your vehicle is totalled while you’re still paying back on its finance agreement, then GAP insurance will cover the difference between what your motor insurance policy will pay out and what you still owe on finance. Likewise, if you bought the car outright, GAP insurance will bridge the difference between your original purchase price and the depreciated market value settlement offered by your motor insurer.
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