Gap Insurance helps to cover the “gap” between the depreciation value of your car and the price you paid for it when you first bought it.
A sad fact is that your brand-new car drops by nearly a third in price as soon as it is driven away from the dealership.
Depreciation is the difference between what you paid for your car and the amount it is worth now.
If your car is written off or stolen then your insurer should pay out what the car is worth at that moment in time. So, if you do not have gap insurance, you will get a replacement car that is not the same value of the car you initially bought. However, if you choose to have gap insurance then the insurer will cover the “gap”.
Most dealerships sell gap insurance when you are buying your new car but it is always worth checking online for current offers.
Is Gap insurance solely for new cars?
No, you can buy it with a new or used car however it is considered more beneficial for new cars as they depreciate faster.
Are there any exclusions?
• Like most insurance policies, there are some exclusions that the insurer will not pay out for.
• Gap insurance only pays out if you have fully comprehensive car insurance and not just third party.
• It will only pay out if your car is fully written off or stolen.
• It will not cover any extras you have added to the car such as accessories or detailing.
Should I get Gap Insurance?
If you own a used car, gap insurance is not as beneficial to you. Your car won’t fall in value as much as a new car.
It should be useful to those who own a brand-new car and are set on having a new car if your one if written off.
If you have bought a car on finance, gap insurance is worth considering because if your car is stolen or written off then you will only be paid out the money your car is worth at that time.
Gap insurance will help to pay the full value of your finance instead of you having to pay the rest from a car you wont be driving.