Money and renewals
How much is GAP insurance? What sets the price and where to buy it
How much is GAP insurance? It depends on the car's value, the cover type, the term and claim limit, plus who sells it. What to check before you buy.
How much is GAP insurance? There is no fixed price: what you pay depends on the value of the car, the type of GAP cover, how long the policy runs, the most it will pay out and who sells it to you. GAP for the same car can be priced differently by a dealer and by a standalone seller, partly because of commission and partly because of how the cover is taxed.
GAP insurance is a separate policy from your car insurance. If the car is written off or stolen and not recovered, your car insurer usually pays its market value at the time. GAP pays some or all of the difference between that payout and a figure set in the GAP policy, such as what you paid for the car or what you still owe on finance. That definition comes from the FCA's GAP rules.
For example, with made-up round numbers: you buy a car for £20,000 on finance. Two years later it is written off, your car insurer values it at £14,000 and you still owe £16,000. Without GAP, you would need to find £2,000 to clear the loan and would have no car. Depending on the type, GAP might cover that £2,000, or the full £6,000 back to the price you paid.
How much is GAP insurance, and why is there no average price?
No official body publishes an average GAP price, and figures you see quoted online are usually old or come from firms selling the product. The only reliable way to know is to get quotes for your own car and compare what each one actually covers.
What the regulator has published is information about value. In 2022, only 6% of GAP premiums were paid out in claims, and some firms paid up to 70% of the premium in commission to the businesses selling it. After the FCA raised concerns, GAP insurers agreed to pause sales from February 2024. From May 2024 it allowed firms to restart once they showed their products gave fair value, and those firms resumed with materially lower commission. The FCA's 2024 value data shows GAP claims costs at over 100% of premium for that year, which it says reflects its intervention and should be used with caution. A price quoted a few years ago tells you little about today.
What sets the price of GAP insurance?
The value of the car
GAP pays the difference between the car insurer's valuation and a fixed figure. The higher the purchase price or finance balance, the bigger that potential gap, and the more the insurer may charge to cover it.
The type of GAP cover
The Financial Ombudsman describes the main types like this:
| Type of GAP | What it pays | Things to check |
|---|---|---|
| Finance GAP | The difference between your car insurer's payout and what you still owe the finance company, paid to the lender | If you put down a large deposit, there may be no shortfall on the loan, so the deposit is not covered |
| Return to invoice | The difference between your car insurer's payout and what you paid for the car | How the policy defines "purchase price" or "invoice price" |
| New car (vehicle replacement) | Enough to cover a new car of the same model and specification | Whether the replacement price is capped |
Cover that pays out more in more situations generally costs more.
How long the policy lasts
GAP policies run for a set term, and the FCA requires the seller to tell you the duration before you buy. A longer term covers more years of depreciation, which usually means a higher premium. Some people match the term to the length of their finance deal.
The claim limit
Many GAP policies cap the amount they will pay on a claim. A lower limit can mean a lower price, but if the shortfall on your car is bigger than the cap, you pay the rest. Check the limit against the realistic gap for your car, not just the price.
Who sells it and how it is taxed
This is the part most price guides leave out. Insurance Premium Tax is charged at 12% on most insurance and 20% at the higher rate. HMRC's guidance says the higher rate applies to insurance relating to a car that is arranged through, or supplied by, the business that supplies the car (or someone connected to it), other than ordinary motor insurance.
There is an important exception in the same guidance. GAP and similar car value insurance where any payout can only be used to pay off a finance agreement is not charged at the higher rate, because it is treated as linked to the finance rather than the car. So the tax on dealer-sold GAP depends on the type of policy, and it is worth asking which rate applies to the quote in front of you.
Do you already have some of this cover on your car insurance?
Before paying for GAP, read your car insurance policy. The Financial Ombudsman notes that motor policies often provide a new vehicle if the insured car is less than a year old and is written off, which can mean GAP adds little in that first year.
New car replacement on a car policy often comes with conditions, such as the car being bought new, being under a certain age or mileage, and you being its first registered keeper. These vary between policies, so check the wording rather than assuming. If you are weighing up how write-off valuations work more generally, our guide to agreed value vs market value after a write-off covers how insurers settle a total loss.
What must a car dealer tell you before selling GAP?
When GAP is sold in connection with the sale of a car, including where it is sold alongside a finance deal, the FCA's rules (ICOBS 6A) apply. Before the sale, the seller must give you in writing or another durable medium:
- the total premium for the GAP, shown separately from any other prices
- its main features, benefits, exclusions and limitations
- a statement that GAP contracts are sold by other distributors, whether or not you are buying the car on finance
- how long the policy lasts
- whether the GAP is optional or compulsory
- when the sale can be completed, and the date you were given this information
The dealer then cannot conclude the GAP sale until at least 2 clear days have passed since you were given that information. The only exception is if you start the purchase yourself and confirm you understand the waiting period, in which case it can be sold the day after you received the information. In practice, as the FCA put it when it made the rules, add-on GAP cannot be introduced and sold on the same day.
These rules are still in force. In December 2025 the FCA said it would decide in 2026 whether to change the GAP rules, and in its June 2026 consultation it said it was not proposing changes to the existing GAP rules while it collects more data on the effect of its 2024 intervention.
The rules cover GAP sold with a vehicle, not standalone GAP.
Where can you buy GAP insurance?
GAP is usually sold by car dealers or lenders, but it can also be bought on its own. The main routes are:
- The dealer or finance company, at the time you buy the car (subject to the waiting period above)
- A standalone GAP provider, buying direct from a firm that sells GAP on its own
- An insurance broker, who can look at policies from more than one GAP insurer
Whichever route you take, the seller must be authorised by the FCA, or be an appointed representative of an authorised firm. Kompare is not an insurer and does not compare prices: it puts you in touch with a specialist FCA-authorised broker, who contacts you with quotes.
What affects how much you end up paying for GAP?
A lower premium is not much use if the policy does not cover the real shortfall. These are the points that change the price:
- Overlap with your car policy. If your car policy already replaces a new car written off in its first year, that overlaps with the start of any GAP term.
- The type of cover. Finance GAP, return to invoice and replacement cover pay different amounts. Some buyers only need the loan cleared; others want their deposit back too.
- The term and claim limit. A longer term or higher limit usually costs more, but a term that is too short or a limit that is too low can leave a shortfall.
- Time to look at other options. For GAP sold with a car, the 2-day waiting period gives time to look at the dealer's written price alongside other policies of the same type, term and limit.
- Tax and commission. Which rate of Insurance Premium Tax is included and how much commission the seller receives both feed into the price.
For tips on the car policy itself, see how to reduce car insurance without invalidating your policy.
What if you change your mind or something goes wrong?
Some insurers do not refund premiums if you cancel outside the cooling-off period, and the Financial Ombudsman checks whether this was clearly explained at the sale. The Financial Ombudsman says that where you cancel early it would usually expect a proportionate refund, less a small administration fee, unless you have already used the cover.
If you think GAP was mis-sold, for example you were not told it was optional or not given the information above, complain to the firm that sold it first. If you are not happy with its final response, you can take the complaint to the Financial Ombudsman Service, which considers things such as whether the policy's limits were clearly explained and, where the seller recommended a policy, whether it was suitable.