GAP Car Insurance

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GAP insurance

GAP insurance is designed to protect customers from any money lost as a result of car depreciation. A vehicle loses some of its value every few months; however, if your car is stolen, destroyed by fire or completely written off in an accident, a standard car insurance policy will only fork out the value of the car at the time of the incident. Very few insurers cover the amount that is invariably lost as a result of depreciation.

The purpose of GAP cover

With GAP insurance, customers can literally bridge the ‘gap’ between what the insurer is prepared to pay and what the car is actually worth or, in some cases, ‘top up’ the insurance payout so that a new car can be bought.

It is worth remembering that GAP insurance is not an alternative to a traditional car insurance policy; it is an optional extra and will incur an additional cost.

Types of GAP motor insurance

There are three main types of GAP insurance: Return to Value (RTV), Return to Invoice (RTI) and Vehicle Replacement (VRI) insurance. Premium prices vary and restrictions apply, so car owners should read the small print before deciding which type of GAP policy to buy.

Return to Value insurance

Return to Value tends to be the cheapest form of GAP insurance. If the car is a ‘total loss’ (written off or stolen), RTV pays the difference between the insurer’s (depreciated) payout and the actual retail value of the car. Policies are usually available for seven years after the car is bought.

So, if your car is worth £12,000 when you buy your Return to Value cover and the insurance settlement is £9,800, the GAP insurance policy will pay out the £2,200 difference. However, the £12,000 valuation may not equal the amount originally paid for the car.

Return to Invoice cover

Return to Invoice tends to be slightly more expensive than Return to Value as it refunds the difference between the invoice price – the price actually paid for the car – and the depreciated insurance settlement. RTI is usually reserved for cars that have been owned by the current owner for three months or less, but cars can be up to seven years old when the policy is purchased.

So, if you paid £12,000 for your car and the insurance provider settles at £9,000, your GAP insurance policy will top up the remaining £3,000.

Vehicle Replacement insurance

Vehicle Replacement Insurance is generally the most expensive type of GAP cover as it provides the largest benefit. VRI bridges the gap between the insurance payout and the cost of a brand new car. It is usually available for new and ex-demonstration models that are three months old or less.

So, if you paid £12,000 for your car and your insurer settles at £10,000 but it would cost £14,000 to buy a new car, your GAP policy will pay out £4,000. VRI is the only type of GAP insurance that will pay out more than the original price of the car.