When you buy a car you must take care to protect it against any unforeseen circumstances that can impair it.While the car insurance policy protects you from damages to the car, the protection is not adequate when your car is stolen or written off.Insurance companies pay for the value of the car on that date which is lower than the price that you had paid for it thereby creating a gap in compensation that you receive. This could prevent you from buying a new vehicle once again. In order to fill the gap you have to take an additional policy known as the GAP insurance policy. What this GAP insurance policy signifies and how it works has been briefly discussed in this article.

What is GAP?



GAP is the acronym of Guaranteed Asset Protection. It ensures that the value of cars is retained at its original level despite the effects of depreciation. Cars have a high rate of depreciation almost 30%. Therefore at the end of the first year only, the value of your car gets reduced by one third. With each passing year, this trend continues thereby increasing the gap in value of the car as compared to its initial value.In order to protect the value of the asset the insurance policy has to be taken.

Types of GAP insurance policies

  • Return to Value – Also known as RTV, this is the most basic policy for asset protection. You can take the policy anytime after buying the car provided there is a gap of at least three months between the date of purchase of the car and buying the policy. The shortfall that arises in value between what is paid by the insurer and the value of the car on the date of taking the GAP insurance is taken care of by this policy.
  • Return to invoice – With the purpose of filling the gap in value of the car this policy can be taken within three months of buying the car. This policy (RTI) ensures that the gap arising from the valuation of the car and its original value is compensated to the policy holder.
  • Vehicle replacement insurance - This policy (VRI) helps you to buy a new vehicle with ease when your car has been written off. The difference arising from the cost of a new car and the written down value of the car can be recouped by this policy.

The price that you have to pay depends on the type of policy that you choose.



Whether or not GAP policy should be taken is the question that can come to your mind. It depends on your ability to do risk assessment for your car. If that seems a bit difficult then resort to numbers.In a year 120,000 vehicles are stolen in the UK and 5000,000 cars are written off every year. Take a call by considering the chances of your name appearing in the list of car losers. However, your car should qualify for the conditions that accompany the policy.