GAP insurance is what?
When leasing an automobile, GAP insurance is a type of optional vehicle protection that you can select. Basically, if your lease vehicle is deemed a complete loss, a GAP insurance policy will fill the gap between your insurer’s payout and the finance balance.
However, a lease car’s primary insurers will only provide a settlement amount that represents the car’s value at the time it is deemed a total loss. As a result, you may frequently encounter a financial gap that must be filled in order to pay the balance of your contract. This is where a GAP insurance coverage can be useful.
When you lease an automobile, the gap insurance pays the difference between the ACV and the remaining balance on the lease.
How does gap insurance work?
When you lease an automobile, the gap insurance pays the difference between the ACV and the remaining balance on the lease. Therefore, if your car was stolen or destroyed, your comprehensive or collision insurance would pay out the ACV of the car.
Is gap insurance included in lease?
Some car lots and lessors include gap insurance as a component of your loan agreement and payments automatically. To find out if you already have gap coverage, review your lease arrangement.
Do Leased Cars Require GAP Insurance?
If you hire a car, GAP (Guaranteed Asset Protection) insurance is recommended because it pays off any unpaid debt under your leasing contract should the vehicle be stolen or written off. This ensures that even if your primary insurer’s payout is insufficient to pay the residual debt, you won’t incur any unforeseen expenses.
Although GAP insurance is optional when leasing a vehicle, having it in addition to your main policy has many benefits. To learn everything there is to know about leasing with GAP insurance, continue reading.
How does GAP insurance with a lease work?
GAP insurance covers the difference between the car’s value at the time of the loss and the balance still owed on the lease if your leased vehicle is deemed a complete loss.
The finance company for your selected lease deal won’t require you to purchase GAP insurance. However, if you’re concerned about being charged more for the vehicle in the worst-case situation during your agreement, it can give you additional peace of mind.
There are two primary coverage options for GAP insurance plans, namely:
- The most fundamental type of coverage, Finance/Contract Hire GAP insurance, covers the difference between your auto insurer’s settlement amount and the remaining finance balance due for the leased vehicle.
- The most expensive form of coverage is typically GAP insurance for vehicle replacement. In addition to paying off your lease car debt, it also covers the cost of a new car with the same specifications, mileage, and age as your old model.
Does purchasing GAP insurance make sense?
If you want full peace of mind while you are leasing a car, GAP insurance is something to think about.
Although it’s highly unlikely, it’s still possible for your leased vehicle to be written off or stolen. In reality, a Churchill Car Insurance analysis* found that 384,000 cars on average are written off annually in the UK. In the same sentence, the auto leasing business Rivervale discovered that 56,288 vehicles were targeted by thieves in the previous year after submitting a FOI (Freedom Of Information) request to the DVLA. (Driver and Vehicle Licensing Agency).
These are significant figures that should be taken into account when determining whether or not to purchase GAP insurance for your leased vehicle.
*Analysis of Direct Line Group claims data for written-off vehicles (Cat A-D) between 2015 and 2016 using Direct Line Group’s market share to produce a total UK number.
What does GAP insurance cover?
- Financial protection in the event that your leased vehicle is totaled, written off, or stolen.
- the potential to pay off your lease finance early without having to pay expensive penalties to your leasing company.
- To guarantee affordability, choose between a one-time annual payment or 12 monthly direct debit payments.
- Coverage for your leased car for the duration of your contract
- Coverage for driving your leased vehicle internationally* Coverage for additional drivers as long as they are
- listed as such on your completely comprehensive car insurance policy
What does GAP insurance not cover?
- Amounts paid out for cars written off by drunk or drugged drivers.
- coverage for vehicles deemed a complete loss due to wilful misconduct, illegal activity, or fraud (e.g. leaving the vehicle unattended with keys in the ignition).
- if someone who has access to the keys to the car steals it.
- Coverage for leased vehicles with modifications.
- insurance payments, warranty fees, road taxes, and dealer-installed accessories/additions.
Look around to find the best insurance for you because some providers might cover any installed extras or accessories.
How much does GAP coverage cost?
The value of your leased vehicle, the length of your contract, and the amount of coverage you want all factor into the price of your GAP insurance.
For instance, a three-year lease on a Toyota Aygo with a value of £11,484 can be protected with standard Contract Hire GAP insurance for just £114* over the course of the full contract.
The cost of the more comprehensive Vehicle Replacement insurance is a little bit higher at £189.
You can get a free quote from a GAP insurer online in just a few minutes, so shop around before settling on a single provider to get the best value.
Prices are dependent on Direct Gap’s GAP insurance plans.
What is the duration of GAP insurance?
Depending on how long your lease agreement is for, you can choose a GAP insurance coverage that lasts 1 to 5 years.
Since three years tends to be the most common lease period for Personal Contract Hire agreements, the majority of GAP insurance coverage typically lasts for three years.
How do I obtain GAP coverage for a leased vehicle?
Similar to how you would when setting up your main comprehensive cover, the majority of GAP insurance companies have websites that let you setup and pay for your policy all in one place.
Alternately, the majority of them have sales staff you can call and arrange everything through.
When shopping around, don’t forget to review the policy details of each GAP insurance estimate you consider.
Before you sign on the dotted line, it’s crucial to confirm that the quotation has everything you require, even if it appears good on paper.
For instance, if you want your lease vehicle replaced and this process to go more smoothly, you’ll need to consider spending more.
