These are genuine claims: each example uses the figures shown in the claim settlement.
GAP insurance does not always work in the same way. The amount paid depends on the type of cover you bought and what it was designed to protect.
Most claims start with the amount your motor insurer values your vehicle at when it is written off. What happens next depends on whether your GAP insurance covers the original invoice price, the cost of a replacement vehicle, a contract hire shortfall or a percentage on top of the motor insurer's valuation.
These four examples show how that works in practice - and why GAP insurance can do much more than simply clear outstanding finance.
How is a GAP insurance payout worked out?
Your motor insurer will normally pay what it believes your vehicle was worth immediately before it was written off. GAP insurance can then add to that payment - but what it aims to top it up to depends on the type of cover.
Invoice GAP
Aims to top up the motor insurer's Total Loss valuation to the higher of either the original vehicle invoice price or the finance agreement settlement figure (if applicable) at the time of claim.
See the Claim ExampleReplacement GAP
Provides everything that Invoice GAP does, but can top up to the cost of an equivalent brand-new replacement vehicle if that figure is higher.
See the Claim ExampleContract Hire GAP
Aims to cover the difference between the motor insurer's valuation and the amount you are required to pay the leasing company after the vehicle is written off. It can also cover some or all of your initial rental.
See the Claim ExampleTop-Up GAP
Increases the motor insurer's Total Loss valuation by 25%, up to the policy's £10,000 claim limit.
See the Claim ExampleOur policies can also contribute towards the excess deducted by the motor insurer. As with any insurance, the final payment is subject to the policy terms, conditions and claim limit.
Real Replacement GAP claim: Ford Kuga
This Ford Kuga was written off in an accident around 22 months after it was bought.
Replacement GAP looks at the original vehicle invoice price, the cost of an equivalent brand-new replacement and the finance agreement settlement figure. The claim is worked out using whichever of those figures is highest.
| Cost of a brand-new replacement vehicle | £36,590.00 |
|---|---|
| Original vehicle invoice price | £41,910.16 |
| Finance agreement settlement figure | £24,069.64 |
| Highest of the three figures | £41,910.16 |
| Less: motor insurer's Total Loss valuation | − £22,982.00 |
| GAP insurance shortfall | £18,928.16 |
| Plus: contribution towards the motor insurance excess | + £500.00 |
| Replacement GAP payment | £19,428.16 |
What happened here? The original vehicle invoice price was higher than both the replacement cost and the amount required to settle the finance agreement. The policy therefore used the original invoice price to calculate the claim.
If the customer had only bought Finance GAP, the calculation would have been based on the much smaller £1,087.64 difference between the finance settlement and the motor insurer's valuation. Because their Replacement GAP also included Invoice GAP protection, it covered the £18,928.16 difference back to the original invoice price, before adding the excess contribution.
Real Invoice GAP claim: Mercedes-Benz CLA
This Mercedes-Benz CLA was written off in an accident around 22 months after it was bought.
Invoice GAP compares the original vehicle invoice price with the finance agreement settlement figure and uses whichever is higher. In this case, the invoice price was comfortably the higher figure.
| Original vehicle invoice price | £36,424.99 |
|---|---|
| Finance agreement settlement figure | £28,421.43 |
| Higher of the two figures | £36,424.99 |
| Less: motor insurer's Total Loss valuation | − £24,656.00 |
| GAP insurance shortfall | £11,768.99 |
| Plus: contribution towards the motor insurance excess | + £455.00 |
| Invoice GAP payment | £12,223.99 |
What happened here? The motor insurer's valuation was already more than enough to clear the finance settlement. Finance GAP on its own would therefore have paid nothing. Invoice GAP instead covered the £11,768.99 difference between the motor insurer's valuation and the original vehicle invoice price, before adding the excess contribution.
Real Contract Hire GAP claim: Hyundai Ioniq 5
This leased Hyundai Ioniq 5 was stolen around 20 months into the contract hire agreement.
Because the customer did not own the vehicle, there was no invoice price for the policy to protect. Instead, Contract Hire GAP covered the shortfall between the motor insurer's valuation and the leasing company's termination charge. It also paid towards the initial rental.
| Leasing company's termination charge | £29,976.68 |
|---|---|
| Less: motor insurer's Total Loss valuation | − £24,737.00 |
| Contract hire shortfall | £5,239.68 |
| Plus: contribution towards the initial rental | + £3,000.00 |
| Plus: contribution towards the motor insurance excess | + £595.00 |
| Contract Hire GAP payment | £8,834.68 |
The customer had paid an initial rental of £3,088.80. Their policy provided the maximum £3,000 contribution towards it. The termination charge also included VAT that the customer could not recover.
What happened here? The policy covered the £5,239.68 shortfall owed to the leasing company, then added £3,000 towards the initial rental and £595 towards the motor insurance excess.
Real Top-Up GAP claim: Volkswagen Golf
This Volkswagen Golf was stolen. Top-Up GAP works differently from Invoice and Replacement GAP: instead of working back to an invoice price or replacement cost, it adds 25% to the motor insurer's Total Loss valuation.
| Motor insurer's Total Loss valuation | £13,824.00 |
|---|---|
| 25% Top-Up payment | £3,456.00 |
| Plus: contribution towards the motor insurance excess | + £650.00 |
| Top-Up GAP payment | £4,106.00 |
What happened here? Twenty-five per cent of the motor insurer's £13,824 valuation was £3,456. The policy then added £650 towards the motor insurance excess, producing a total GAP insurance payment of £4,106.
This was comfortably within the policy's £10,000 claim limit. Top-Up GAP provides a straightforward percentage increase, but it does not aim to return you to the original invoice price or the cost of a replacement vehicle.
What can we learn from these claims?
- Different GAP policies do different jobs. The right calculation depends on whether you bought Invoice, Replacement, Contract Hire or Top-Up GAP.
- Clearing finance may be only a small part of the protection. In both the Kuga and Mercedes claims, protecting the original invoice price resulted in a much larger payment than Finance GAP alone would have provided.
- Replacement GAP does not always pay to the replacement vehicle cost. It compares the relevant figures and uses the highest one. For the Kuga, that was the original invoice price.
- Contract Hire GAP is designed for leased vehicles. It deals with the amount owed to the leasing company and can also protect some or all of the initial rental.
- The motor insurance excess can make a difference. Each of these policies contributed towards the excess deducted by the motor insurer.
- Claim limits still apply. None of these four payments reached its claim limit, but every claim remains subject to the policy terms and maximum benefit.
Remember: every claim is different. The amount paid will depend on the policy you bought, its terms and claim limit, and the figures that apply when your vehicle is written off.
For a broader explanation of the products and the questions to ask before buying, read our Complete Guide to GAP Insurance.
Compare the protection available
About David Burns-Keane
David Burns-Keane founded GAPinsurance.co.uk in March 2004, establishing what he understands to have been the UK's first independent, specialist, direct-to-consumer online GAP insurance provider.
For more than two decades, David has sought to champion the interests of GAP insurance customers through better value, clearer explanations, stronger policy wording and improved terms and conditions. This guide was written and reviewed by him using genuine claim records and insurer settlement calculations.
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