GAP Insurance stands for Guaranteed Asset Protection and is designed to ensure that drivers aren’t left out of pocket if their vehicle is declared a total loss. 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 leased cars without any option to purchase when the policy ends (as opposed to PCP). The insurance is designed to cover the financial shortfall if the vehicle is written off. 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.
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 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.
What is covered with Contract Hire GAP insurance?
Contract hire GAP insurance is designed to cover the following if your leased car is written off:
Up to 100% of any outstanding vehicle rental payments you owe to the leasing company.
The financial shortfall between the market value settlement figure provided by your motor insurance company and the value expected by the car leasing company.
Up to £3,000 can be recovered from your deposit. This must be added to your GAP Insurance policy for an additional premium.
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.
What are the eligibility requirements for Contract Hire GAP Insurance?
There are various eligibility requirements to consider for this type of insurance. These include:
Comprehensive cover from your motor insurance company; third party or motor trade policies are not permitted.
The leaseholder must have purchased a GAP policy within 365 days of collecting the vehicle.
There must be no option to buy at the end of the contract.
The vehicle must be a standard right-hand drive, and the leaseholder must be eligible to drive in the UK
The insured vehicle must not be modified against manufacturer guidelines.
What are the restrictions to Contract Hire GAP Insurance?
As well as eligibility requirements to consider, check the insurance exclusions. Lease GAP insurance with ALA will not cover the following:
Taxis, cabs, courier or delivery vehicles.
Commercial vehicles over 3,500 kg, tuition vehicles, rental cars.
Rally, competition vehicles or off-road vehicles.
Emergency service vehicles.
Scooters, motorcycles or mopeds.
Cars that seat more than eight people.
Contract Hire GAP insurance with ALA
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:
Up to 100% coverage of the outstanding rental payments
We cover the shortfall between the amount owed to your rental company for the vehicle and the market value settlement figure from your motor insurer.
GAP cover for up to five years.
Regulation by the Financial Conduct Authority. All policies are also protected by the Financial Compensation Scheme.
ALA will pay up to £250 towards your motor insurance excess as standard.
You can choose additional cover for your initial rental or deposit, up to £3,000.
Tyre and Alloy Wheel, Scratch and Dent Insurance can be purchased in addition to your policy.
You have 365 days from vehicle collection to purchase a GAP Insurance policy from us.
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.
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 (minus a cancellation fee of £35) when you cancel your policy. Contact your GAP insurance company to cancel and refund your policy.
How do contract Hire, Hire Purchase and PCP GAP policies work?
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.