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Choosing GAP insurance when you have a contract hire agreement

19 September 2023

Written by Katie Rollin

|  5 Minutes

Contract hire, or leasing, has become a popular option amongst drivers who don’t want to own the car or have any responsibility that goes much beyond getting insurance. It allows you to drive a brand-new car at a monthly cost for a certain time period, but it must be returned at the end of the contract.

There are, however, some car leasing companies that may allow you to buy the car, but this must be requested, and it isn’t a guarantee. If the leased car is written off or stolen, your comprehensive motor insurer will pay out the market value of the car, which may not cover the outstanding payments left on the car. This is where contract hire GAP insurance comes in.

In this guide, we will explore which GAP insurance policies apply to contract hire agreements, if GAP insurance is worth it for leased cars, and how you can acquire a quote for your policy. We will also discuss why you need lease GAP insurance, and how you can inquire about a policy with us at ALA.

How does GAP insurance work with contract hire?

There are various different examples of GAP (Guaranteed Asset Protection) insurance, including Back to Invoice Plus (or Return to Invoice Plus), Vehicle Replacement Plus, Agreed Value and Contract Hire Plus. If you have recently leased a vehicle, you will only be eligible for Contract Hire Plus GAP insurance.

If your car is declared a total loss (if it is written off or stolen), a contract hire GAP insurance policy will cover up to 100% of the outstanding rental payments, as well as any shortfall in the market value settlement provided by your comprehensive car insurance company. For an additional premium, you can also choose to protect your initial deposit worth up to £3000. This way, you can protect your full investment, and you won’t have to worry about any shortfall should the worst happen to your car. Like all GAP insurance policies, however, there are some restrictions to be aware of.

To qualify for a contract hire GAP insurance policy, you must have collected the car within the last 365 days, and you must not be using it for certain commercial purposes, such as a taxi or delivery vehicle. To find out more about contract hire GAP insurance, such as the possible restrictions and exclusions, you can visit us on our website here.

Lady Adjusting the rear view mirror in a car

Is GAP insurance worth it for car and van leasing contracts?

The settlement from your comprehensive motor insurer may not fully cover your liability to the leasing or finance company; they will only cover the value of the car at the time and the finance company may also look to recoup some or all of the remaining lease payments. With GAP insurance, you can settle your lease agreement and payments if your car is written off or stolen without facing extra charges and cover your liability under your contract hire agreement.

With GAP insurance, you also won’t have to worry about finding a replacement vehicle; you will be able to start a new agreement without any debt from the previous contract hanging over you. Also, if you opted for initial rental protection, you could get back how much you put down for your last car and use it to fund another deposit.

If you would like to create a quote or discuss your policy, you can get in touch with our team today.

How do I get a quote for contract hire GAP insurance?

Retrieving a quote for a Contract Hire GAP insurance policy is straightforward on our website. First of all, you need to tell us how you funded your vehicle, and the date that you took delivery (or if you don’t have your vehicle just yet). Next, you will need to state how old your vehicle is. Most cars on contract hire agreements are brand new and usually won’t be any older than four months.

We will then direct you to our “Build your quote” page, which will ask you for the vehicle’s make, its estimated price, and the term of cover you will need for your policy. You will also have the option to tell us your monthly rental payments, and whether you want initial rental cover or additional policies.

All of these factors will enable us to calculate how much your policy is going to be. GAP insurance policies can be paid upfront or monthly depending on your personal preferences and circumstances. Our level of cover provided will always go up to the estimated vehicle price you have stated in order to give you the most protection possible. For instance, if your vehicle is worth £13,000, then £13,000 is the maximum amount we will pay out should your insured vehicle be declared a total loss.

Cat in the Scottish Highlands

Do I need GAP insurance?

No matter whether your car was leased, financed or bought outright, GAP insurance is a great choice to help you protect your investment, taking away some of the worry should your car be written off or stolen. There are various different types of GAP insurance to suit your needs, each of which has its own benefits. The GAP Insurance we provide at ALA includes:

GAP insurance is a great choice for anyone who wants a brand-new replacement car or who has an expensive model that is predicted to depreciate quickly. However, GAP insurance cover works for anyone, no matter how you funded your car or how much it is worth. However, there are exceptions when it comes to value. You can find out more about the benefits and exclusions on our insights page.

Contract hire GAP insurance from ALA

All of our GAP insurance policies here at ALA are competitively priced, with a range of options that can be tailored to suit your circumstances and preferences. Our easy-to-navigate quotes page can help you find the best cover for you at a price that suits your needs. You can also choose from a range of premium extras, from initial rental protection to tyre and alloy wheel insurance.

To find out more, or to arrange a quote over the phone, you can visit our contact page here.

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