Glossary: GAP insurance

Designed to cover any shortfall from the proceeds of a comprehensive motor policy should a vehicle, purchased on finance, be written off and the insurance payout be less than the outstanding loan on the vehicle. For example, if you borrow £18,000 and, after two years, you’ve paid the loan down to £12,000 but you write the vehicle off and the insurance company will only pay out £7,000, the GAP insurance covers the £5,000 you’d need to find to pay off the car loan.

Relevant to: Car insurance

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