Compare how different Gap products will work

It can be difficult to understand clearly how each type of Gap Insurance can perform if your vehicle becomes a 'write off' from your insurers. We all understand that it is likely that any motor insurance payout will be substantially less than the original price you paid, the outstanding finance settlement or even the cost of replacing the vehicle. These three are all relevant to consider if you have a vehicle to replace, and you are on some form of finance agreement through your motor dealer.

The good news is that there are three different types of Gap Insurance policy that could cover each of these eventualities.

Lets consider how they work by looking at an example:

You buy a 1 year old BMW 3 series for £19,000.

You take a dealer hire purchase agreement, with a £2,000 deposit and £17,000 balance to finance over 5 years.

3 years later the vehicle is written off after being in an accident.

Your motor insurer pays the market value, which is now £7,000

You have a finance settlement figure of £11,000

The equivalent 1 year old 3 series is now £21,000

In this example, lets consider exactly what each of the types of Gap cover will protect

  Finance Gap Insurance
Return to Invoice
Vehicle Replacement Insurance
What is covered?
Finance Shortfall Yes Yes Yes
Invoice Shortfall No Yes No
Replacement Shortfall No No Yes
Benefit Payable