The little known car insurance that could save you £5,000 as payouts TREBLE

Motorists who claim on a little-known car insurance product are finding it more valuable than ever, as average payouts have trebled in four years.

The average payout from Guaranteed Asset Protection - better known as GAP insurance - has jumped from around £1,600 in 2021 to almost £5,000 this year, according to MotorEasy.

But the product, which is primarily used to cover a potential shortfall in a car's value compared to what must be repaid on a finance agreement, in case it is written off in an accident or stolen, has proved controversial in the past.

However, owners who have bought cars outright can also get cover for the difference between the price paid and what insurer deem the value at the point of a claim.

The Financial Conduct Authority launched a probe in 2023 after it was revealed that the average driver with GAP insurance claimed once every 300 years, raising doubts over whether the policy was worth having at all.

However, new data exclusively shared with This is Money suggests those who do need to make a claim are likely to see far more substantial payouts due to the current cocktail of financial risks faced by drivers who have borrowed to buy cars.

Rapid depreciation suffered by some cars - especially electric vehicles - combined with more insurance write-offs, linked to higher repair costs and parts shortages, as well as rising motor theft, have seen the cash value of GAP claims soar.

Experts say the increase in value of claims has shifted GAP insurance from a 'nice-to-have' policy to a 'vital financial safeguard' for those buying cars.

One of the reasons why GAP insurance has proved so controversial in the past is due to it often being sold by dealers alongside cars. This can lead to higher costs and those taking out the cover can often pick up considerably cheaper GAP insurance from a broker.

MotorEasy, the leading car ownership platform, which offers GAP Insurance, believes the increase in value of payouts 'underscores the growing financial risk faced by car owners' in 2025.

It says the combination of factors that has tripled average claim amounts can be traced back to the impact of Covid-19.

The pandemic brought about a period of unusual appreciation in used car values, but prices have since declined to levels seen before the outbreak.

However, for EV, value retention has dropped off a cliff edge, with battery cars now typically losing more than half of their value in just two years.

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While used car prices have been falling, purchase costs for new, more technically advanced vehicles have risen, further increasing the gap between the purchase price and the current market value - thus pushing up GAP insurance payouts.

MotorEasy told This is Money it has seen claims exceed £20,000 for some luxury EV instances.

An ongoing supply chain issue for spare parts triggered by factory closures and the outbreak of conflict since the pandemic, coupled with the more complex nature of modern vehicles and costlier components, has also prompted an increase in insurance write-offs.

This has both triggered an increase in usual volumes of claims but also means owners face a larger financial shortfall if their relatively new car is deemed a total loss.

There have also been high payouts on theft-related claims, with significant financial losses accrued by some models that have been targeted by criminal gangs and suffered from lower residual values as a result.

MotorEasy said 41 per cent of GAP claims over £15,000 have been for stolen Range Rovers, which have been the focus of the recent motor crimewave and - for a period - caused values of some Range Rovers to tumble.

'Our latest data paints a clear picture; the financial risks associated with car ownership are escalating,' said Duncan McClure Fisher, CEO of MotorEasy’s parent company, Intelligent Motoring.

'Making matters worse, economic pressures are leading drivers to delay maintenance and repairs, increasing the risk of mechanical failure and potential write-offs.

'In such cases, the depreciated value of a poorly maintained vehicle further widens the gap covered by GAP insurance.

'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.'

GAP insurance is typically sold as a standalone policy or as an add-on to other sorts of financial deals, like car insurance.

It is usually offered to new car buyers at the point of purchase along with a number of additional products, including additional bodywork protection and cover for interior damage.

However, with very few motorists using these policies - or even knowing they have one at all - and huge commissions made by sales staff selling them as add-ons, the Financial Conduct Authority (FCA) in 2023 launched a probe into them.

Following the investigation, the watchdog raised concerns that the product is 'failing to provide fair value to some consumers,' which saw some 80 per cent of GAP insurance deals pulled from the market.

Car buyers are advised to compare GAP insurance prices through a third part, rather than simply taking out cover through a dealer.