GAP Insurance Payouts Have Tripled: What Drivers Need to Know

3D GAP Coverage text in puzzle concept for GAP Insurance Payouts.

Understanding the Surge in GAP Insurance Payouts

The average Guaranteed Asset Protection (GAP) insurance payout has witnessed a staggering rise, tripling from £1,587 in 2021 to £5,558 in 2024. This surge, according to research by MotorEasy, is largely attributed to increasing vehicle depreciation coupled with rising new car prices. As vehicle values fluctuate, especially given the effects of the COVID-19 pandemic, car owners find themselves navigating a more complex landscape of financial risks associated with car ownership.

The Role of Depreciation and Vehicle Costs

GAP insurance is designed to cover the difference between a car's market value at the time of theft or write-off and the outstanding insurance balance. The pandemic initially caused a peculiar increase in used car values, but this was followed by a rapid decline in some areas, particularly for electric vehicles (EVs). Recent data indicates that EVs can lose as much as 50-60% of their value within just two years, further exacerbating potential losses for owners.

Impact of Vehicle Theft and Claims

Interestingly, not all GAP claims are due to vehicle depreciation; theft plays a significant role, too. A whopping 41% of GAP claims exceeding £15,000 came from stolen Range Rovers. As the value dips post-purchase, owners find themselves facing steep financial losses that the GAP insurance claims aim to mitigate.

Future of the GAP Market

Despite the alarming trends, the GAP insurance market is presently under scrutiny. The Financial Conduct Authority (FCA) has expressed concerns regarding the fairness of services provided by GAP firms. This has made some dealers hesitant to sell GAP products, potentially impacting the availability of essential protection for consumers.

Take Control of Your Car Insurance

With the escalating financial risks associated with car ownership, understanding GAP insurance becomes crucial. As car prices continue to rise and depreciation remains a pressing issue, being informed on your coverage options can make a significant difference. Exploring the market for GAP insurance is not just beneficial—it's a necessary step to safeguard your financial well-being.

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