Do You Need Gap Insurance on a Lease Car?
Unveiling the hidden value of GAP insurance for leased vehicles.
When it comes to leasing a car, one burning question often surfaces – is GAP insurance a necessity? Although not obligatory, GAP insurance serves as a robust financial shield in the unfortunate circumstance of your leased vehicle being stolen or deemed a total loss. In this article, we discuss the intricacies of GAP insurance and its crucial role in a car lease scenario.
What is GAP Insurance?
Known for delivering peace of mind to lessees, GAP insurance is a safety net that covers the discrepancy between your insurance settlement and the outstanding balance on your finance agreement, given that your vehicle has been declared a total loss. It emerges as a vital protective mechanism should your vehicle fall prey to theft or suffer irreparable damage.
GAP Insurance with Leased Vehicles
Wondering how GAP insurance operates with a leased vehicle? Imagine your leased vehicle being written off as a total loss. In this case, GAP insurance steps in, bridging the gap between the vehicle’s value at the time of loss and the residual finance owed on the lease.
To illustrate, let’s assume your car, which you acquired for £16,500, is declared a total loss a year later. After your motor insurance payout, you might face a shortfall of around £5,300. Here, Gap Insurance saves the day, covering the shortfall up to £50,000 (subject to policy terms), along with up to £1,500 for dealer-fitted accessories and £250 towards your motor insurance excess.
Related Reading: The Benefits Of Car Leasing In The UK: Finding The Perfect Car Lease
The Value of GAP Insurance on Leased Cars
If your leased car were to be stolen or damaged, resulting in the absence of a hire car, the payout from your car insurer may fall short of the outstanding lease agreement finance. This deficit would either require you to settle the remaining debt out of your pocket or continue the monthly hire instalments for a car that’s off the road.
However, the silver lining here is GAP insurance, which compensates for the difference between the remaining lease amount and your car insurance payout, keeping you debt-free.
Our GAP policies cater to a variety of needs. Specifically, our Lease GAP policy covers your excess up to £250 and offers a temporary replacement vehicle for up to 28 days post claim approval. This feature proves advantageous as your insurer withdraws any courtesy vehicle once their total loss offer is accepted, potentially leaving you vehicle-less.
Related Reading: Navigating the End of a Car Lease: What to Expect and How to Prepare
Estimating GAP Insurance Cost on a Lease Car
The cost of GAP insurance hinges on various elements, such as the car’s value, lease duration, the chosen type of GAP insurance, and your preferred insurer.
Generally, a higher car value corresponds to a pricier policy.
Typically, in the UK, GAP insurance ranges between £100 and £300 for three years of coverage, excluding the mandatory motor insurance that averages at £417, as the latest car insurance statistics indicate.
Numerous insurers offer free quotes via their online platforms, providing an estimated cost for GAP insurance coverage within minutes. Do note, while some insurers prefer a single payment, others accommodate 12 monthly instalments, as we do at Click4Gap – giving you the flexibility to choose an option that aligns best with your financial plan.
Related Reading: Buying vs Leasing: Pros & Cons To Help You Decide
What Our GAP Insurance Covers
Taking out Click4Gap Gap Insurance ensures financial security, avoiding any potential out-of-pocket losses due to unforeseen circumstances. Our diverse array of gap cover products cater to a variety of vehicle procurement methods, whether purchased, leased, or acquired via a contract hire agreement.
Securing the added protection of Gap Insurance guarantees you:
- Cover for your motor insurance shortfall
- 30-day, no-risk, money-back guarantee
- Up to £250 towards motor insurance excess
- Up to £1,500 in dealer-fitted accessories
- Coverage for any named driver at no extra cost
- Protection in case of vehicle theft involving keys
Evaluating GAP Insurance’s Worth in the UK
If you are engaged in a long-term lease, investing in GAP insurance becomes advantageous as the payout from your insurer may not suffice to cover the remaining lease agreement amount. Lease car GAP insurance offers further benefits, potentially reimbursing some or all of your Initial Rental cover and covering motor insurance excess up to £250.
In conclusion, while GAP insurance may not be a requirement when leasing a car, its strategic role in safeguarding your financial interests makes it a highly valuable consideration.
Related Reading: Negative Equity On Car Finance Explained: Impacts & Solutions
Need Gap Insurance?
There are a few different types of policy you can choose from when taking out your Gap Insurance cover with Click4Gap. These depend largely on how you intend to fund the purchase of your vehicle. So what car Gap Insurance is right for you?
If you paid cash for your vehicle, or paid a sizeable deposit, or if you financed it, Combined RTI Gap cover will pay out the shortfall between the cost of your vehicle and the market value at the point of claim, which is the amount your motor insurer will cover. This is cover that will protect you no matter if you use your vehicle for private use or for business.
If you leased your vehicle or it is under a contract hire agreement, Lease/Contract Hire Gap Insurance will cover you for the shortfall on your lease agreement, after your motor insurer settlement. If, for any reason, you change your vehicle within the first 90 days from the start date, we will also arrange to transfer your cover to your new vehicle without hassle or charge.