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There still remains some confusion around Gap insurance, leading to thousands of drivers being short-changed every year. Drivers fail to recognise that the amount they think they’ll be paid in the event of an insurance claim may not be what they actually get.
Trusted Dealers is keen to put any concerns buyers might have to rest by creating a short guide to Gap insurance below.
What is Gap insurance?
Most fully comprehensive car insurance policies will only offer ‘new car replacement’ during the first 12 months of ownership, but after this time, if your car becomes lost, stolen or a write-off, the insurance payout you will be left with is most likely to leave you out of pocket. The reason being that insurers will only cover the current market value of your car if your claim is successful which is usually nearer to its trade price, and lower than its retail price.
How could I benefit from Gap insurance?
Gap insurance covers the difference between the initial price you paid for your car and the insurance payout you are likely to get. It eliminates the risk that your car insurer won’t pay out enoufh to pay off your finance in the event of a loss, and could therefore be a very worthwhile investment to many motorists.
How does Gap insurance work?
There are a number of different types of Gap insurance so it is important to find the right one to suit your individual circumstances, but the basic premise remains the same. For example, if you bought a new car worth £12,000 and wrote it off three years later when its value had sunk to £5,000, your Gap policy would meet the £7,000 difference.
How much value could my new car lose?
According to Which? Car experts, some new cars such as Fords and Vauxhalls can lose as much as two-thirds of their value in three years, with models like the Mini Cooper SD at the top of the table for value retention, still worth 50% of its value. Furthermore, the current economic climate is having a direct affect on the market value of cars, with current fuel prices meaning diesels and small cars have become better at retaining their value. Larger 4×4 cars are likely to devalue quicker as they are costly to run.
Who benefits the most from Gap insurance?
Gap insurance is a useful insurance to have in the following situations: