Insurers may give you less for your claim but gap insurance will cover the difference

You have probably never heard of gap insurance as it is not required under the law to enable you to drive a car on UK roads, and you may have never considered how it might help you if your car is for example written off in an accident.

Why would you need more insurance anyway, you paid a good amount of money for a third party fire and theft (TPFT) or a fully comprehensive car insurance policy that covers you for just about any eventuality. It is true that a fully comp policy will protect you if anything happens to you, any third party or if your vehicle is stolen or written off in an accident. Unfortunately, if you've ever had a car written off you will know that there is a problem with even the best fully comp policies let alone third party fire and theft. The difficulties soon become evident after making a claim; for example after a bad smash, the loss assessor from the insurance company will come to take a look at the damage, make lot of notes, breathe heavily while shaking his head a couple of times in his attempt to provide a 'good' value for you car.

The reason he nodding is because he knows you are going to ask him how much he thinks you will get for your once prized set of wheels. That is the problem with insurance companies as they never pay as much for a stolen or written off vehicle as we think they should. Well you can't really blame them as everyone wants the best for themselves; you want the most money for your car and they want to spend the least so that they don't make any losses.

This applies equally to used and new cars, although the depreciation is more dramatic with new cars. The moment you drive a car away from the showroom it will lose anything between 10-25% of its value. This problem is compounded if your new or used vehicle is being paid for with finance as you may end up still owing a large amount of money to the finance company even after the insurance company has paid out.

How can Gap Insurance help me?

Consider you paid £15,000 for a car 12 months ago, you will assume that you will be getting a little less because you have been driving it for a year. However this is not the way the insurance company thinks about it as there is that big loss in value when you drove the car away from the dealers and you have put in 9,000 miles on the clock during that year.

If that wasn't enough, the vehicle might have a pretty big engine and the insurance company thinks the market price has fallen down for that vehicle in the last year. If none of these facts apply to your car don't worry, the insurance company has a whole list of reasons why your car is not worth what you think it's worth anyway.

So now, they offer you £8,000 for your car, nearly half of what you paid for it and there's no way you can afford to pay out the £7,000 difference to get another car which is similar. This is where Gap Insurance comes in handy; it makes up the difference between what you paid and what you receive from the insurance company. It's a very reasonably priced insurance policy that will get you back behind the wheel of a similar car without you having to find the extra cash.