Should I buy Gap insurance?

Car insurance

Should I buy Gap insurance?

By Simon Miller

Article 2 of 5

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Should I buy Gap insurance?

Check whether Gap insurance is right for you, and what you need to look out for when buying a policy. 

Unlike car insurance, Gap insurance isn't compulsory and might not always be necessary. Before you start looking for cover, think about whether the product is right for you.

Do I need Gap insurance?

Buying Gap insurance is a personal choice and depends on a number of factors, but it can be useful in the following circumstances:

You used a large loan to buy your vehicle

If you have used finance or a personal loan to buy your car, Gap insurance can prove useful, especially if your loan-to-value is high. 

As finance deals are normally spread over three to four years, you could be left with a large shortfall if you have an accident or the car is stolen.

You’re concerned about the depreciation of your vehicle

The quicker your car loses its value, the less you will get back from your insurer if you have an accident or your car is stolen. Gap insurance will help make up the difference.

Your car is on a long-term lease

If you have long-term rental agreement for a vehicle with a mileage allowance, a write-off could leave you without a car and a bill for thousands of pounds in outstanding finance. Gap insurance can help protect against this.

You might not need Gap insurance if you car is brand new

Many car insurers will replace a brand new car if it's written off in the first year. If your car has just rolled off the production line, check with your car insurer before you look for a Gap provider to see if you would be covered, at least for the first 12 months. 

Gap can often only be bought up to a year after the car's purchase, but some policies will allow you to defer their cover over this period, so that you're not over-insuring. Make sure you read the terms and conditions of both policies carefully before you buy.

Where can I buy Gap insurance and what should I look out for?

Gap insurance is available from a number of different places, but is usually offered to you when you buy a car. However, your dealership may not offer you the best deal, or even the cover that is best suited to your needs. Insurers, brokers and comparison sites all offer the product directly, so make sure you shop around first.

Whatever policy you choose, grasp the key features before you buy. The following are just some of the important elements you should look out for:

  • Length of the policy
  • Excess 
  • Any significant exclusions
  • The value of your vehicle
  • How to claim on your policy
  • How to cancel your policy if you no longer need it 

Buying Gap with your car: the new rules

The sale of Gap insurance with vehicles has proved controversial and is attracting the attention of the regulator, the Financial Conduct Authority (FCA).

Concerned that dealerships were selling Gap insurance alongside vehicles at a high mark-up without clearly explaining the rules, the FCA introduced a host of new rules which came into force on 1 September 2015.

Dealerships selling Gap insurance must tell you the following before you buy a policy:

  • The total premium for the Gap insurance
  • The length of the policy
  • The features, benefits, unusual exclusions and limitations of the product
  • That the product can be bought elsewhere from standalone providers
  • Whether Gap insurance is an optional or compulsory add-on to the sale of the vehicle

In addition, dealerships can no longer sell you Gap insurance on the same day they sell you a car. There must be at least a two-day break, unless you decide to waive the waiting period.

If you do wait two days or longer, the provider should go over the detail of the policy again. The decision to waive the waiting period must be initiated by you, and can't be suggested by the dealership.