There are several types of GAP insurance policies you can choose from. Here are three of the most common:
Return-to-invoice (RTI) GAP insurance
This pays you the difference between your ‘normal’ car insurance payout and the amount you originally paid for the car or what you still owe to a finance provider.
Vehicle replacement GAP insurance
This pays you the difference between your insurer’s payout and, depending on whether you first bought it new or used, either the cost of buying the same car new today or the amount you had paid for it used.
Finance/lease GAP insurance
If you lease your car (which means you don’t own it) and it’s written off or stolen, you could be left with a shortfall because you’ll still owe money to the lease company for a car you no longer have.
Finance or lease GAP insurance pays any outstanding payments you still owe to a car finance or car lease provider. If you’re in negative equity – meaning that if the amount you still owe your lender is more than the value of your car, finance/lease GAP insurance will cover the difference.