Is GAP insurance worth it?

Let’s hope you never have a car crash. But if you do, and it’s bad enough for your car to be beyond economic repair, it will be written off by your insurer. Instead of repairing it, they’ll pay you its market value at the time of the crash. The trouble is, that could be thousands less than you paid for it. It’s at this point you may wish you’d asked yourself, “Is GAP insurance worth it?”

What is GAP insurance?

GAP insurance policies cover the difference between the motor insurance payout and the cost of replacing the car with another just like the one you bought.

So let’s say you buy a car costing £15,000. A year later, it gets wrecked in an accident. You dust yourself off, call your insurer, and they say the car is now worth £10,000. A GAP (Guaranteed Asset Protection) insurance policy will cough up the £5000 you’ll need to buy another £15,000 car.

So, is GAP insurance worth it?

If you never have an accident bad enough for the car to be written off, you’ll never need to claim on your GAP insurance. But that’s the trouble with insurance, it always seems like an expense you could do without, right up until the moment you really need it.

Ask yourself, could you afford to replace your car with a brand new one if it was written off or stolen? Or would you be happy to buy a cheaper car next time? If you can honestly answer “yes” to either question, you can probably do without GAP insurance.

Also, you should check your motor insurance policy. Some will replace a written-off car with a brand-new one if the loss occurs in the first year the car is on the road.

On the other hand, if you really don’t want to take a step back down the motoring ladder, GAP insurance will put you back on the rung where you started. For a relatively small cost, it will give you peace of mind.

It’s particularly useful if you took out a large loan to pay for the car. If you still owe money on a car that’s been destroyed in a crash, GAP insurance will help you pay off your debts and still have money to put into a replacement car.

It also makes more sense if you have a new or relatively new car rather than an old one. That’s because new cars lose value quite quickly in their first few years on the road. Once a car has been on the road for several years it loses value much more slowly, so there’s less need for GAP insurance.

What should I look for in a GAP insurance policy?

Like any insurance cover, you’ll want an affordable premium. But that’s not the only measure of a good GAP insurance policy. Check for extras like a courtesy car or legal cover, and whether there are any significant exclusions.

Should I get GAP insurance?

GAP insurance isn’t for everyone, but for many new drivers, it provides extra peace of mind and financial protection.

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