Action taken by the FCA has improved the image of the UK’s GAP insurance industry, with fairer pricing, a mandatory cooling off period, and less high-pressure sales tactics.
But how does GAP insurance work? And do you really need it?
What is GAP insurance? What does GAP insurance do?
A GAP (Guaranteed Asset Protection) insurance policy would come into effect if your vehicle is stolen or otherwise written off. It essentially covers any ‘total loss gap’ between the price you paid for your car and its market value at the time of theft/write-off (as determined by your motor insurer).
GAP insurance is really just a way of getting back the original amount you paid for your car - and a way of mitigating depreciation - which can be as high as a third as soon as you drive a new car off the forecourt, and 60% over three years.
Without GAP insurance, you’ll only receive what the car is worth at the time of the claim, rather than its original value.
If you don’t have GAP insurance, your insurer would still pay out enough money to buy a replacement vehicle of the same model, condition and age.
GAP insurance can be useful if you originally took out finance to buy a car, since regular car insurance will only pay what the car is worth at the time of any claim - leaving a shortfall between what you owe and what the insurer pays out. Having GAP cover means you’ll be able to pay off the loan.
In this article we’ll explore whether or not GAP insurance is worth it for you.
Why was GAP insurance in the UK paused by the FCA in 2024?
In 2024, the UK’s Financial Conduct Authority paused the selling of GAP insurance due to concerns that many policies were not providing good value to buyers. Indeed, there were many examples of dealerships selling GAP insurance policies where much of the premium (up to 70% in some cases) went towards sales commission, rather than funding the insurance.
High pressure sales tactics in dealerships were also a concern, as was the low level of premiums being returned as claims (around 6%).
However, the industry has made changes to the way it sells GAP insurance to the UK’s motorists, and sales have resumed.
What is the new 4-day rule?
Would-be buyers of GAP insurance now have a mandatory four-day cooling off period before they can buy cover. It basically means if you find out about a product on day 1, you cannot purchase it until day 4. This gives you time to absorb the terms and conditions, and to compare the product to others on the market - before meaning a final decision.
The 4-day rule means you won't be pressured into buying a GAP policy in a dealership ‘on the spot’.
The three different types of GAP insurance
Return to invoice (RTI) gap insurance
Return to invoice or ‘return to value’ GAP insurance covers the difference between what your regular insurer will pay out for your vehicle, and the original cost (‘invoice’) - or what is owed to the finance provider. This is the most common type of GAP insurance sold in the UK.
Vehicle replacement gap insurance
This covers the difference between what your car insurer will pay out, and what it would cost to buy the vehicle new at current prices (‘total loss gap’) - or if it was a second hand vehicle, how much it cost when originally bought.
Contract hire gap insurance
You can only take out contract hire GAP insurance if you lease your vehicle and have no option to purchase it. You’ll be paid out for the car's current market value by your motor insurer, while the GAP policy will cover any remaining payments owed on the contract.
GAP insurance types: What does each cover
Here’s an at-a-glance table of the three main GAP insurance products on offer in the UK.
Type of GAP Insurance | What it does | Who is it for? |
Return to Invoice (RTI) GAP Insurance | Covers the difference between your motor insurer's payout (market value) and either the original purchase price (invoice value) or the amount still owed to the finance provider, whichever is higher under the policy terms. | If you have bought a new or nearly new car, whether outright or on finance, and want to protect against depreciation. This is the most common type of GAP insurance in the UK. |
Vehicle Replacement GAP Insurance | Covers the difference between your motor insurer's payout and the cost of replacing your vehicle with a brand-new equivalent model at current prices (‘total loss gap’). For some used vehicles, cover may instead be based on the original purchase price, depending on the policy. | If you bought a new car and want enough money to replace it if prices have increased since you bought it. |
Contract Hire (Lease) GAP Insurance | Covers any outstanding lease or contract hire payments that remain after your motor insurer has paid the vehicle's current market value following a total loss. | If you’re leasing a vehicle under a contract hire agreement with no option to buy the vehicle at the end of the lease. |
GAP insurance exclusions
As with any insurance product, GAP insurance is provided with a number of exclusions/stipulations - notably:
- You’ll need to have comprehensive car insurance (third party cover is not sufficient).
- It will only pay out if your car is a complete write off (i.e. the motor insurance provider has placed your car in one of the four write-off categories - A, B, S or N).
- It doesn’t include cover for any deductions that your main motor insurer makes (such as for missed monthly payments).
- GAP insurance only covers the original price/value of the car - it won’t pay you for things you’ve added like alloy wheels or a sound system.
How much does GAP insurance cost?
Generally, the cost of GAP insurance has come down since the FCA intervention in 2024. Lower commissions and improved competition are two of the main reasons for this price fall.
You can expect to pay between £150 and £300 for GAP insurance on an average priced vehicle.
So, should I take out GAP insurance?
There are pros and cons to buying GAP insurance, and it will suit some drivers more than others.
● You want a brand new replacement vehicle/the sum you paid in the first place
If, in the event that your car is written off or stolen, you want a brand new car that is essentially the same as the one you drove off the forecourt in, then GAP insurance could be a good idea. For instance, you bought your car for £40,000, and it gets written off two years later. Your motor insurance provider agrees to pay out the market value of £25,000. Vehicle-replacement GAP insurance would pay out the remaining amount - so you have enough to buy the same model at today’s prices. That means they would pay £15,000, plus a sum to cover any price increases.
Return to invoice GAP insurance, meanwhile, would ensure you get the sum you paid for the vehicle in the first place.
● You have outstanding finance on your vehicle
If you took out finance to buy your car - for example a personal loan - then GAP insurance could be very useful. With motor insurance alone, you would only be able to claim for the value of the car at the time it is stolen or written off, which would only cover part of the original loan.
But with GAP insurance, you’d also get the difference between the loan and the motor insurance pay out, so you would be able to clear the debt. Most GAP insurance products would cover any interest owed up until that point, although you may need to pay an early settlement fee to the finance provider.
When you don’t need GAP insurance…
If you’re not worried about getting a brand new replacement vehicle (i.e. you’re happy to use the pay out to buy a car of the same value, condition and age), then GAP insurance isn’t really necessary.
If your car is less than one year old, your insurer will likely offer ‘like-for-like’ replacement anyway - so GAP insurance would serve no purpose. Sometimes policies even offer like-for-like replacement on cars up to two years old.
Finally, if you own a used car, it's unlikely to have fallen in value by a huge degree, making GAP insurance less useful.
How to buy cheap GAP insurance
Before the FCA stepped in to change how GAP insurance was sold, such products were normally bought through brokers and specialists.
But in 2026, using comparison sites to find good deals on GAP insurance is your best option. However, it’s also worth going to providers directly, to see if they have any offers on (these are unlikely to be listed on comparison sites).
Complaints about GAP insurance
If you have any issues with how a GAP insurance product was sold, or you’re having trouble getting a provider to pay out, you can use Resolver, the free complaints service.
Failing this, you should contact the Financial Ombudsman Service.
