Thanks pugliablue, what you say makes sense and I reckon you're probably right about the mis-selling and making people think it's essential too.
Anyway, according to the policy summary at ala.co.uk, their Return to Invoice(RTI) GAP pays either the difference between the insurance payout and the original invoice price of the car OR the outstanding balance owed on the finance agreement, whichever is the greater.
Their Vehicle Replacement (VR) GAP pays either the difference between the insurance payout and the current value of replacing the vehicle with a new one OR the outstanding balance owed on the finance agreement, whichever is the greater.
So, you only need to select the claim limit that will definitely cover the difference between the original cost and the insurance payout (in anything up to 3 years time). How much they pay and who they pay it to all depends on when (if at all) during the GAP insurance period you total your car.
MY BRAIN HURTS !!