It is insurance to cover the value your car may lose over time. Most new cars lose value as soon as they leave the garage forecourt. A recent study reported that most cars lose between 50% and 60% of their value in the first three years of ownership.
If you are involved in an accident, many insurers will only pay out the current market value of your car. This can see you left with a shortfall between the compensation you receive for your damaged car and the price you originally paid. This will particularly affect anyone who has taken their car out on finance.
GAP insurance will pay the shortfall between the car’s value at the time you make your claim versus the amount you originally paid for your car.