Should I Add Car Leasing GAP Insurance to my Contract Hire Agreement?

What Is GAP Insurance?

GAP (Guaranteed Asset Protection) Insurance is an insurance policy for the Car Leasing market, designed to protect you from financial loss in the event of your lease car being written off or stolen at any time during the course of your leasing contract.

It should cover the amount of any shortfall between what your comprehensive motor insurance policy will pay out and how much you will have to pay the finance company in order to settle the car lease agreement. As this difference, in some circumstances, could amount to a sizeable sum, GAP Insurance is well worth considering when leasing a car.

Car Leasing Gap Insurance is an optional insurance product which is not part of your normal Motor Insurance policy. So, the ‘Fully Comprehensive’ insurance policy you took out on your lease car (compulsory on lease vehicles) does not include GAP Insurance.

The policy is a single premium contract for the duration of the Contract Hire Agreement. You do not have to buy your Car Lease GAP Insurance from your leasing company, and you may save money if you purchase it from an independent provider.

It is available to you whether you choose Business Car Leasing or Personal Contract Hire.

How Does GAP Insurance work?

A Contract Hire Agreement will be terminated as a result of the vehicle being the subject of a write off, and the finance company will require settlement of the lease contract.

So, if your lease car were to be written off or stolen (and not recovered) during your contract period, even if it is entirely the fault of a Third Party, you would have to settle the finance agreement with your leasing company, who will provide you with a settlement figure at the time of the loss.

Your motor insurer will pay you out on a total loss claim based upon the vehicle condition and mileage at the time of the loss. In other words, they will only pay out the current market value of your lease car, and there is a risk that this figure could be less than the amount you owe to the finance company.

Guaranteed Asset Protection or GAP Insurance indemnifies you in the event that your lease car is the subject of an Insurance write off, where the claim settlement by your motor insurer is less than the termination charge applied by the finance company.

Why Do I Need GAP Insurance?

As soon as your brand new lease car is driven off the dealer’s forecourt, it starts to depreciate. Almost all vehicles suffer from depreciation at a higher rate in the early years (especially in the first year) and then at a slower rate as they get older.

If your lease car is written off, it’s quite possible that the amount your motor insurer will pay out will be less than the amount you will owe to settle the finance agreement. The difference could be as much as a few thousand pounds, which you would have to pay unless you had taken out Car Leasing GAP Insurance. So GAP Insurance protects you against this eventuality.

In addition, your GAP Insurance Company will save you the time and hassle of having to deal (and negotiate) with your motor insurer about the amount they are prepared to pay out.

Like any Car Insurance product, GAP Insurance is designed to protect you from a potential future risk that may or may not happen. If you did find yourself in the unfortunate situation of having your car written off or stolen, your GAP Insurance policy could save you thousands of pounds.

Sadly, it’s only after you have had a claim that you realise the importance of Car Leasing GAP Insurance, so you should give it serious consideration when leasing a car, especially if you want to ensure hassle and stress free motoring during your contract period.

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Source: http://www.car-leasing-guide.com/blog
Link: http://www.car-leasing-guide.com/car-leasing-advice/gap-insurance

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