GAP Insurance stands for Guaranteed Asset Protection and is designed to ensure that drivers aren’t left out of pocket if you’re a victim of vehicle theft or your write off your car. GAP insurance is available for cars bought outright, on finance, and through a contract hire agreement.
Contract Hire GAP insurance is the policy available specifically for a new vehicle bought on lease without any option to purchase when the policy ends (as opposed to cars bought with a PCP loan). The insurance is designed to cover the financial shortfall in the event of a total loss. With lease GAP, this includes any outstanding rental payments and the comprehensive car insurance settlement shortfall.
In this article, we will look at how Contract Hire GAP insurance works, what this type of specialist vehicle insurance covers, what the benefits of GAP insurance cover are and whether the GAP Insurance policy could be helpful.
Vehicles depreciate quickly, typically by up to 60% in the first three years, which is the standard length of a leasing contract. You can also be left with hefty charges if your vehicle is written off and you can’t complete your lease agreement.
GAP insurance is a type of financial protection insurance which tops up your car insurance settlement after a total loss. It’s different to finance GAP insurance because it helps you afford a replacement vehicle rather than simply covering the remaining payments owed to the finance company. There are several types of GAP insurance depending on how you paid for your vehicle. This article discusses lease GAP insurance.
Contract Hire GAP insurance tops up the settlement from your motor insurer as well as covering the remaining loan payments. We’ll also cover up to £250 excess and up to £3,000 towards your lease deposit to make finding a replacement lease car straightforward.
When people begin a Contract Hire agreement, they risk owing their car leasing company a significant amount if their vehicle is declared a total loss. You may need to pay any outstanding rental payments and shortfall in the market value settlement from your motor insurer (if it isn’t enough to cover your costs). You may also have to pay a significant excess amount to your motor insurer and find the funds for the initial rental for a new lease car.
The good news is, GAP insurance policies can help to cover these unexpected costs. Without GAP insurance, you will have to cover a considerable shortfall. You may also have to pay a significant excess amount to your motor insurer.
Alternatively, GAP insurance can help to cover a this financial shortfall after a total loss.
Contract hire GAP insurance is designed to cover the following if your leased car is written off:
Our handy calculator can estimate how much you could be short on your leased vehicle if it’s written off before the end of your lease agreement. Find an accurate quote for your vehicle here.
There are various eligibility requirements to consider for this type of insurance. These include:
As well as eligibility requirements to consider, check the insurance exclusions. Lease GAP insurance with ALA doesn’t cover the following:
We offer the highest-quality GAP insurance to protect your finances when renting. We will pay out if your comprehensive motor insurance company pays out, and we also offer a price-match guarantee; you won’t get a better deal elsewhere. Some other benefits of our Contract Hire policies include the following:
Get your GAP Insurance quote today and protect your finances
Hire purchase is a popular way to buy a car these days but you can end up being out of pocket if you write the car off before paying off your finance. Contract Hire GAP insurance is only available for leased cars with no option to buy. However, Back to Invoice Plus GAP insurance, Vehicle Replacement Plus or Agreed Value GAP insurance may be more suitable for hire purchase or PCP-bought cars.
There aren’t many circumstances where GAP insurance doesn’t pay out. We have a 99% payout rate which means if your comprehensive car insurance pays out after a total loss, so will we. If you make a fraudulent claim, or breach the terms of service, we may not be able to cover your loss.
Vehicle leasing is a popular way to pay for vans or commercial fleets but the potential shortfall after a total loss could cripple your business’ cashflow. Contract Hire GAP insurance is available for commercial fleets. Speak to one of our customer service providers to arrange a multi-vehicle policy.
If you return your contract hire vehicle earlier than planned, you may face early termination fees. GAP insurance doesn’t cover these unplanned costs but if you do choose to end your lease agreement, you can cancel GAP insurance at any time and receive a pro-rata refund of unused premium.
Around 1 in 5 of us have written off a vehicle in the past five years and the vast majority can’t afford a like-for-like replacement with their car insurance payout. GAP insurance is a good idea to top up your settlement and make affording a replacement vehicle easy. Moreover, with the loss in vehicle value that occurs in the first year of ownership, GAP insurance is handy to combat depreciation.
Firstly, get a quick GAP insurance quote based on your vehicle value, age, mileage and make. Select the how and when you bought the vehicle. Select your policy length (1, 2, 3, 4, or 5 years), preferred level of deposit protection and maximum cover limit. Add any additional coverage options such as tyre & alloy wheel insurance or excess cover. Pay for your policy monthly via direct debit or in an interest-free lump sum.
In the event of a total loss, contact us to get support with making a claim. We advise that you wait until you’ve spoken to us before agreeing to a car insurance settlement; we can liaise with your provider to get you a better deal. Many car insurer undervalue cars after a total loss. Read about making a claim.
A Contract Hire agreement means you pay towards a car you have no option to own at the end of your lease agreement. You are responsible for any costs to the lease company if your vehicle is declared a total loss during your contract; these may not be fully covered by your comprehensive motor insurer. You will have no equity in the car and a financial shortfall to cover. Outstanding rental payments can exacerbate this. Alternatively, GAP insurance can cover these costs; you can even cover your deposit and your excess if you wish.
The types of GAP insurance at ALA include, Back to Invoice GAP, Vehicle Replacement Plus, Contract Hire Plus and Agreed Value GAP Insurance. Learn about which GAP Insurance policy you need here.
You are entitled to a full refund within the cooling-off period – the first 30 days from policy initiation. After this time, you are entitled to a pro-rata refund of any unused premium when you cancel your policy. Contact your GAP insurance company to cancel and refund your policy.
For Hire Purchase, and PCP, you have the option to own the vehicle at the end of the agreement. You will need either Back to Invoice (BTI) GAP Insurance or Vehicle Replacement (VR) GAP Insurance. These policies cover the shortfall between the insurance company settlement and the invoice price of the vehicle (BTI), the cost of replacing the car (VR), or the amount owed on finance, whichever is higher at the time. Contract Hire Plus GAP Insurance covers leased vehicles with no option to buy at the end of the term. Contract Hire GAP covers any outstanding payments and the shortfall between the motor insurance settlement and the amount owed to the leasing company to settle the agreement.
Get a GAP insurance quote now!
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