What is GAP insurance?
The term GAP insurance refers to Guaranteed Asset Protection. If an event occurs where your vehicle is damaged beyond repair, your insurance provider typically covers the cost of the vehicle to its current value. Therefore, it could potentially leave you in a financial loss.
For example: You may have leased a car with the value of £40,000. Typically, in the first year of ownership, the value can decrease between 15% and 35%. If you need to claim between the 2nd and 3rd year, the value could potentially be less than 50%. This can be a damaging financial loss and leave you out of pocket.
That is where GAP insurance comes in handy. This type of insurance complements your standard insurance and covers the gap you may have in depreciation value, providing you will full protection when leasing your vehicle.
Benefits of GAP Insurance
There are three main benefits to investing in GAP insurance, them being; financial protection, peace of mind, and flexibility in vehicle choice.
Financial Protection: GAP insurance is an additional protection layer to your standard insurance. It shields you from the potential financial burdens that you may experience when leasing a car that is damaged beyond repair. By covering this gap, you are ultimately preventing yourself from being out-of-pocket.
Peace of Mind: There are many elements to consider when leasing a car, but our expert team will walk you through your lease agreements with a fine-toothed comb, so you are prepared and avoid a potential financial setback. Get in touchwith our team to start your used car leasing adventure.
Flexibility in Vehicle Choice: By including GAP insurance in your lease agreement, you will have more choice on what vehicle you wish to lease rather than solely factoring in the depreciation rate.
What Are the Different Types of Gap Insurance?
There are 5 different types of GAP insurance, each one designed to meet the different needs of the car leaser. These include:
Return to Invoice (RTI): If your car is written off, your insurance company will pay the top-up total loss from what you paid for your vehicle.
Return to Value (RTV): This will cover the difference between the value of the car when it was first purchased and the insurance payout.
Finance GAP Insurance: Your insurance provider will cover you for outstanding loan payments on a lease car. Therefore, protecting you by paying the difference between a standard total loss payment and the value of a new car.
Vehicle Replacement (VR): If your car has been stolen or written off, this type of insurance will replace your car with a brand new one, meeting the same aspects of your original lease.
Contract Hire GAP (CHG): By opting for this type of insurance, your insurance will pay the difference between your vehicle insurance and the outstanding amount on the lease agreement.
Do I Need GAP Insurance on a Lease?
GAP insurance is not a legal requirement when leasing a vehicle, however it the additional security blanket you may need if times get tough and you lease vehicle gets written off the road.
Although there is hope nothing bad happens to you or your lease vehicle, the dangers of driving are unpredictable. You could look at it as spending around £200-£300 on GAP insurance to give you that peace of mind if, God forbid, anything bad did happen.
If you don’t have GAP insurance and you were in a situation where your car resulted in a write-off, you might find yourself paying a lot more than what GAP insurance costs.
It is important to note that you can only apply for GAP insurance if you have fully comprehensive car insurance. Therefore, it is important to consider when insuring your car to make the decision of GAP insurance before finalising the insurance of your lease vehicle.
What Does GAP Insurance Cover on a Lease?
GAP insurance on a lease vehicle can cover the costs of your new or used car in the circumstance of a write-off for theft, accidental damage, fire and water damage. The GAP insurance policy pays the difference between the vehicle insurance settlement and the early settlement amount.
It will cover up to £1,000 of your vehicle insurance policy excess, and you can be assured it will cover for the shortfall between your insurance payout and the current value of your lease vehicle.
Should I Get GAP Insurance on a Lease Car?
With any kind of leasing agreement, it is important to look at all possibilities. Think of the worst-case scenario and how you may cope with experiencing a potential stolen or written-off car. With this, you can determine your lease agreement to rid of any stress or hassle this situation may cause.
By closing the gap on potential financial loss, you are saving yourself for long-term damage. With our expert adviceand helping hand along the way, you will be on the road without a worry, in no time.