Guaranteed asset protection (Gap) is being hailed as a “vital safeguard” against financial ruin, just 18 months after the Financial Conduct Authority requested that insurers stop selling it.
Gap insurance covers the difference between a car’s purchase price or the amount of finance owed on it and its current market value in the event that the car is written off before the finance has been repaid.
In February 2024, the FCA said it was concerned such products were failing to provide fair value to consumers, with only 6% of the amount they were paying in premiums being paid out in claims. Further, the FCA said it had seen examples of some firms paying out as much as 70% of the value of insurance premiums in commission to parties involved in selling Gap insurance policies.
Three months later, in May 2024, the FCA announced that firms that had reduced their commission payouts had been permitted to restart sales of Gap insurance.
Today, with Gap insurance once again freely available, companies selling such cover say that car buyers can’t afford not to have it.
What is Gap insurance, and does your new car need it?
Despite ‘fair value’ concerns, providers say it offers essential protection
News
by John Evans
3 mins read
30 September 2025
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Guaranteed asset protection (Gap) is being hailed as a “vital safeguard” against financial ruin, just 18 months after the Financial Conduct Authority requested that insurers stop selling it.
Gap insurance covers the difference between a car’s purchase price or the amount of finance owed on it and its current market value in the event that the car is written off before the finance has been repaid.
In February 2024, the FCA said it was concerned such products were failing to provide fair value to consumers, with only 6% of the amount they were paying in premiums being paid out in claims. Further, the FCA said it had seen examples of some firms paying out as much as 70% of the value of insurance premiums in commission to parties involved in selling Gap insurance policies.
Three months later, in May 2024, the FCA announced that firms that had reduced their commission payouts had been permitted to restart sales of Gap insurance.
Today, with Gap insurance once again freely available, companies selling such cover say that car buyers can’t afford not to have it.
Their argument rests on their claim that insurers are now more likely to write off damaged cars, owing to the rising costs of repairing them and the current dearth of, and difficulty in obtaining, spare parts. With depreciation eroding used car values and thereby reducing the settlement sums paid by insurers and new cars becoming more expensive, motorists who have finance balances to clear and more money to find for their next car risk being seriously out of pocket. This also applies in the case of stolen cars.
Motoreasy – a company that sells Gap insurance, charging around £192 for a three-year policy – says its average claims payout has more than tripled in three years, from £1587 in 2021 to £5559 in 2024. For electric vehicles, some of which can lose up to 60% of their value in two years, Motoreasy says its payouts have exceeded £20,000.
Founder Duncan McClure Fisher said: “Our findings underscore the growing financial risks faced by car owners due to rapid vehicle depreciation, rising new car costs, spare parts shortages leading to insurance writeoffs and a surge in vehicle theft. The combination of so many influential factors has created a perfect storm, where Gap insurance is no longer just a nice-to-have but an increasingly vital financial safeguard.”
The expert’s view on Gap insurance
Gap insurance has a reputation for benefiting dealers rather than their customers, resulting from high-pressure sales tactics and the FCA’s verdict that it wasn’t delivering fair value.
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However, Tim Kelly, founder of independent consumer advocate Motor Claim Guru, believes it’s essential at present. “Anyone who takes out finance on a car should take out Gap insurance,” he said. “For example, a car on a PCP belongs to the finance company, who, in the event that it is written off, will want its money back. Without Gap cover, that cost is down to the motorist, who will also have to find the money for a replacement car.”
At the same time, Kelly accuses insurers of being too keen to write off cars unnecessarily: “The owner is entitled to demand the insurer repairs their car up to its market value. Writing it off could cause an owner ‘foreseeable harm’, which insurers are not permitted to do.”
