What is gap insurance and is it worth it?
New cars can lose up to a third of their value in year one. Here's how gap insurance protects you if yours is written off or stolen – and whether it's worth the money.
The Cazoo editorial team
Published on 28 August 2026 | 6 mins read
Drive a new car off the forecourt and it can lose thousands of pounds in value before you've even had a chance to enjoy the new car smell. So if the worst happens and it's written off or stolen a few months later, would your insurance payout actually cover what you paid for it?
That's the shortfall gap insurance is designed to cover. It's an optional add-on policy that pays out the difference between what your standard car insurance gives you after a total loss claim and what you originally paid, or what you still owe on finance.
But is it something you actually need, or an expensive extra you can do without? We've taken a closer look at what gap insurance covers, how much it costs, and whether it's worth adding to your motoring budget.
What is gap insurance?
Gap insurance – short for Guaranteed Asset Protection – is an optional policy that sits alongside your standard car insurance.
If your car is written off or stolen and never recovered, your comprehensive car insurance provider will only pay out its market value on the day of the incident – not what you originally paid for it. Because cars lose value so quickly, that payout can fall well short of the price you paid, or of what you still owe on a car finance agreement.
Gap insurance covers that shortfall, so you're not left out of pocket, or still paying off a loan for a car you no longer have.
How does gap insurance work?
Gap insurance only kicks in once your main car insurance has settled a claim as a total loss.
Your insurer works out the car's value on the day it was written off or stolen – known as its market value – and pays that amount. Your gap insurance provider then tops up the difference between that settlement and whichever figure your policy is based on, whether that's the price you paid, the amount you still owe on finance, or the cost of buying an equivalent replacement.
The main types of gap insurance
There are a few different types of gap insurance on the market, and it's worth knowing the difference before you buy, as they each cover slightly different things.
- Return to invoice (RTI): pays the difference between your insurer's settlement and the original price you paid for the car when you bought it.
- Finance gap insurance: covers the difference between your insurer's payout and the amount you still owe on a PCP or HP agreement, protecting you from being left with debt on a car you no longer own.
- Vehicle replacement insurance: pays out enough to buy a brand-new equivalent of your car, rather than simply matching what you paid for it – useful if your car has increased in value or you want a like-for-like replacement.
- Lease gap insurance: works in a similar way for drivers who lease their car rather than buy it, covering the gap between the settlement figure and the remaining lease payments.
How much does gap insurance cost?
Gap insurance is generally inexpensive compared with the amount of money it could save you. Policies typically cost between around £100 and £300 for up to three years of cover, though the exact price depends on the value of your car, the length of cover, and the type of policy you choose.
It's worth shopping around, as buying gap insurance directly from a specialist provider is usually considerably cheaper than buying the same cover from a car dealership. Your car's insurance group will also affect what you pay for your main policy, so it's worth checking that too before you buy.
What are the benefits of gap insurance?
The biggest advantage of gap insurance is financial protection. New cars can lose between 15% and 35% of their value in the first year alone, and as much as 60% within three years, so the gap between what you paid and what your car is later worth can be substantial.
If you've bought your car on finance, gap insurance is particularly valuable, as it stops you being left paying off a loan for a car that no longer exists. It can also bring peace of mind, especially if you've stretched your budget to buy the car in the first place – in the same way a car warranty protects you against unexpected repair bills.
What are the drawbacks of gap insurance?
Gap insurance isn't right for everyone. If you've put down a large deposit, are on a short finance agreement, or have enough savings to cover any shortfall yourself, it may not be worth the extra cost.
It's also worth checking your existing car insurance policy first, as some comprehensive policies already include new car replacement cover for the first year, which could make a separate gap insurance policy unnecessary. And because used cars depreciate more slowly than new ones, the potential shortfall – and therefore the value of gap insurance – tends to be smaller if you've bought a used car outright rather than on finance.
Gap insurance also won't cover any modifications, aftermarket accessories, or deductions your main insurer applies, such as for excess or unpaid finance charges outside the agreed terms.
Is gap insurance worth it?
Whether gap insurance is worth it really comes down to how you paid for your car and how much you stand to lose if it's written off or stolen.
If you've financed most or all of the purchase price through a PCP or HP agreement, have a long-term loan, or bought a car that depreciates quickly, gap insurance can be a sensible – and relatively cheap – way to protect yourself against a potentially large financial hit.
On the other hand, if you paid a large deposit, have a short finance term, or have savings set aside to cover any gap, you may decide the extra cost isn't necessary.
Where can you buy gap insurance?
You can buy gap insurance from your car dealership at the point of sale, but it's often cheaper to buy it independently from a specialist insurance provider. Most providers let you buy within a set window after you take delivery of the car, commonly somewhere between 90 and 180 days, though this varies, so it's worth checking before you decide.
Buying independently means you can compare prices and cover levels rather than accepting the first policy you're offered, and, following the FCA's recent changes, gives you more confidence that the policy on offer represents fair value. If you're buying a used car, it's also worth running a vehicle history check so you know exactly what you're insuring in the first place.