Is Gap Insurance requirement for vehicle  purchases in the UK? No!

Simple answer to a simple question, but it is one that is often asked. In the ‘dim and dark’ ages of car sales, Gap Insurance was often assumptivily included in deals on the basis that customers would want it (and dealers made a healthy profit!).

So if Gap Insurance is not required by law why do dealers offer it?

Well firstly, Gap Insurance could benefit you if your vehicle is written off. Therefore as they are aware of it they should tell you about it.

In fact, with the complications of FSA regulations they could even be in deep water if they have not offered it to you and you could have benefited if you have a write off.

They cannot discuss it with you however, if you state you do not gap insurance from them. Instead they should get you to sign a disclaimer saying they have discussed it with you and that you do not want it.

They also offer it to you because they make a profit on it, this helps pay for the running of the dealership, the salesman, business manager, sales manager and general manager!

Do I have to buy Gap Insurance from the dealer I buy the vehicle from?

NO!!!!!!!

Gap Insurance is like car insurance, life insurance, pet insurance and just about any other type of insurance you care to mention. The dealer will offer a policy supplied and underwritten by an insurance company. If you make a claim, the dealer will have little or no part in the process.

Generally , dealer gap insurance policies are vastly more expensive than policies you can source from independant online brokers. There are some reasons for this:

  • Dealers have to charge IPT (Insurance Premium Tax) at 20% as they have sold the vehicle to you. Buy online, and this tax is only 6%
  • Dealers sell a small number of policies per year in comparison with online, specialist brokers. Therefore, the supply price from an insurer is likley to be higher to a dealer.
  • Remember the long list of dealer costs you are paying for, the salesman, the business manager, the sales manager, the general manager, the receptionist etc. In the days where the margins in the vehicle are very small, the dealer uses these ‘add on’ products as a good source of income.

So there you have it, you do not need to have Gap Insurance, but if you do shop around and get your Gap Insurance policy for the best price possible!