In the world of motoring, few things are more misunderstood than GAP insurance. GAP insurance is an optional but smart form of insurance which provides cover for the shortfall between the amount paid out by an insurer and the amount paid for the car/amount outstanding on a finance agreement in the event of a write off.

Here are a few common myths about GAP insurance.

Why it is Called GAP insurance

Many people assume that this type of policy has its name due to the fact that it covers a gap in a payout and the amount originally paid, but this is not the case. Although it makes sense why people would assume this, it actually stands for Guaranteed Asset Protection.

It Can Only be Purchased From a Motor Dealer

You are likely to be offered GAP insurance when you purchase a car from a motor dealer, but this is not the only place that you can purchase it and you are actually better off purchasing it from a specialist provider, such as Direct Gap as this will provide the best rates, flexibility and fewer exclusions.

It’s Only Needed for a Car on Finance

This is another common myth which is important to debunk -- GAP insurance is available if you have paid for the car in full or if you have taken out a loan or finance deal.

GAP Insurance Purchased Online is Different to GAP Insurance from Dealers

The GAP insurance that you purchase online is no different to what is available at a motor dealership, but as mentioned above you will usually find better rates and general levels of cover from an online provider.

GAP Insurance Only Offers 1 Level of Insurance

There are actually 5 levels of insurance for GAP insurance:

Finance -- Covers the outstanding finance left to pay on the vehicle

Return to Invoice -- Pays the difference between the original cost and the insurance company pays out (current market value)

Vehicle Replacement -- Provides you with the money to buy a new version of the vehicle

Return to Value -- Cover up to the value of the vehicle when you purchased it

Lease -- Covers the rest of the contract costs and early settlement fees

These the main misconceptions that people tend to have about GAP insurance. It is an often misunderstood form of insurance but one which every motorist should consider because it could save you thousands of pounds while also providing important peace of mind knowing that you are protected if the vehicle is ever written off or stolen.