What is Gap Insurance and Do I Need it?

If you drive, you need car insurance. It’s illegal to drive without it. But what about gap insurance? What is gap insurance, and do you need it?

This is your essential guide to gap insurance. Not all drivers need it. But for some drivers, it could make a huge difference.

What is Gap Insurance?

Gap insurance protects you from significant financial loss if you’re involved in an accident, and your car insurance provider declares your car a write-off. G.A.P. stands for Guaranteed Asset Protection. Car insurance providers declare cars to be “write-offs” when they sustain so much damage that they’re no longer safe to drive.

They will also write-off cars that might cost too much to repair, even if they’re still technically safe to drive. You can learn more about why car insurance companies write-off cars, and the different categories of write-offs, in our detailed guide. Find it here.

If your car’s a write-off after an accident, so long as you have comprehensive car insurance, you should get a financial settlement for the loss of your car. However, this financial settlement will only cover your car’s market value. This will almost certainly be less than the price you paid for the car.

Gap insurance will cover you for the difference between the amount you paid for the car, and its current market value. So if you’re involved in an accident and your car insurance provider writes-off your car, you won’t suffer any financial loss.

Three Different Types of Gap Insurance

There are three main types of gap insurance policy. The type you choose will largely depend on whether you bought your car from a dealership, or from a private seller:

RTI Gap Insurance

RTI stands for Return to Invoice Cover. If your car insurance provider declares your car a write-off, your policy will cover the difference between your car’s purchase price, and the amount your insurance pays out. Some policies even cover outstanding finance payments.

If you bought your car from a dealership within the last six months, this is the gap insurance for you.

AVC Gap Insurance

AVC stands for Agreed Value Cover. When they write-off your car, your insurance providers will place a value on the vehicle. AVC will cover you for the difference between your insurer’s valuation figure, and your car’s value as it was at the start of your insurance policy.

If you bought your car from a private seller, or if you bought it from a dealership more than six months ago, you need AVC gap insurance.

CHG Insurance

CHG stands for Contract Hire Gap. This should cover you for outstanding rental payments on your car, as well as the lease termination fee, and the usual difference between your car’s market value and your insurance payout. If you’re leasing a car you don’t own, you’ll need CHG insurance.

How Much is Gap Insurance?

If you buy a brand new car, your car dealership might offer you a gap insurance policy. Not many car insurance providers offer gap insurance as part of their policies. If you want gap insurance, you’ll have to get your cover from a specialist provider.

If you want gap insurance, it pays to shop around. Don’t just take what the dealer offers you. Check a few independent providers. You might find you can get the same cover but for less. One thing to remember though: The more expensive your car, the more you’ll pay for gap insurance.

Do You Need Gap Insurance?

No, it’s not a legal requirement but it can be equally beneficial to people who have just bought an expensive brand new car and to those buying lower value cars but still a significant investment.

New cars rapidly lose their value. And as expensive cars tend to cost a lot to repair, insurers might write-off some cars even if they’ve only sustained minor damage. In these cases, gap insurance can make a huge difference. It will mean you won’t suffer any financial loss, whereas with a standard insurance policy, you might be shocked to see just how quickly your car’s depreciated in value.

So if you’re considering buying a car brand new from a dealership, gap insurance could provide essential peace of mind that, no matter what happens, you’ll be totally covered. However, it is worth checking your car insurance policy first as some insurance companies do include new car replacement as standard for new cars up to a certain age or mileage.

Gap Insurance for Used Cars

If you’re buying a used car, gap insurance is essentially worthless. This is because used cars will already have devalued quite a bit from their original value. So the gap between the amount you pay for the car and your insurance payout will be a lot smaller. Most likely, it will be so small that gap insurance just won’t be worth the expense.

Most car insurance providers offer courtesy cars, and even replacements, as part of their comprehensive car insurance policies. So for the vast majority of drivers, gap insurance might be a waste of money.

Before you invest in any sort of gap insurance, take a look at what your comprehensive car insurance policy covers. You might find that you already have adequate cover for any situation. But if you want total peace of mind that your brand new car won’t be a total write-off after an accident, then you should start shopping around for a good gap insurance policy to complement your comprehensive policy.


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