Yes, GAP insurance bought from the dealer is horrendously expensive! The supplying GAP insurer’s price to VW would be significantly lower than £499, but VW are just plain greedy and apply a massive commission mark up to their supplying insurer’s price which is their profit margin. If VW were forced to show how much of the £499 was for the GAP cover and how much was their profit, I very much doubt you would have bought it. Chances are the VW product is a ‘return to invoice’ product rather than Vehicle Replacement cover, so not as good as some other GAP products available elsewhere.
Hindsight’s a wonderful thing, but as with normal car insurance, always shop around when buying GAP. There are lots of alternative suppliers out their offering the same, or better product at a significantly lower cost.
As @Toppy has said, provide a screen print to the dealer as evidence that you have a service plan, and always keep copies of all financial documentation relating to your car throughout your period of ownership in case you need it in future. I was in the position where I needed my purchase information some months after I bought my current car, and it proved invaluable in discussions with the dealer.
