Contract Hire Gap Insurance: What You Need To Know

Contract Hire GAP insurance is a type of cover that pays the difference between the valuation of your vehicle at the time of an insurance claim and the settlement figure of your contract hire agreement. This type of insurance is suitable for leased vehicles and can be purchased in addition to a fully comprehensive motor insurance policy. In the event of a total loss claim, Contract Hire GAP insurance will cover the outstanding rental payments for the vehicle and any shortfall in the market value settlement provided by the insurer. This can include reimbursement of up to £250 of the comprehensive insurance excess and, for an additional premium, protection of the initial rental/deposit of up to £3,000.

Covers up to £3,000 of your initial rental

Contract Hire GAP insurance is a type of cover that pays the difference between your motor insurer's valuation of the vehicle at the time of a claim and the settlement figure of your contract hire agreement. It also reimburses you for up to £250 of excess deducted by your motor insurer, along with up to £3,000 of any initial rental you paid at the beginning of your agreement. This initial rental cover is an optional extra that you can bolt on to your policy for an additional premium.

The whole idea of GAP Insurance is to put you back in the same financial position you were in before leasing or purchasing a vehicle. However, a standard Contract Hire and Lease Hire GAP policy will only cover the amount outstanding on the agreement and not any initial rental. With initial rental protection, you can protect that amount and ensure that if something happens, you walk away with no liability and your advanced rental returned to you.

For example, if you have a contract hire vehicle worth £20,000 and it is declared a total loss, your insurance company will pay out the fair market value of the vehicle at the time of the claim, which may only be £10,000. The bill from the contract hire finance company to settle the finance agreement might be £18,000, leaving a shortfall of £8,000. In this case, Contract Hire GAP Insurance will pay out the £8,000 shortfall, leaving you with no financial obligations and ready to order another vehicle. If you have Initial Rental Cover, you will also get back your deposit/first rental sum of up to £3,000.

Initial Rental Protection is especially useful if you have paid a low initial rental on your agreement (e.g. 20%) and are on a contract hire deal. It is also a comprehensive feature if you have paid a large initial rental and want to ensure you get that money back in the event of a total loss.

Pays the difference between your insurer's valuation and the settlement figure of your contract hire agreement

Contract Hire GAP insurance is a type of cover that pays the difference between your motor insurer's valuation of the vehicle and the settlement figure of your contract hire agreement in the event that your car is written off. This type of insurance also reimburses you for any excess deducted by your motor insurer, as well as any initial rental you paid at the beginning of your agreement.

For example, if your vehicle is worth £20,000 and you owe £18,000 to the finance company, but your insurer will only pay out £10,000, Contract Hire GAP insurance will cover the £8,000 shortfall, leaving you free of any financial obligations. This type of insurance is available for leased or contract hire vehicles that have been collected within the last 365 days and are subject to an agreement with no end-of-term buying option.

In addition to covering the shortfall, Contract Hire GAP insurance can also provide a courtesy car for you to use for up to 28 days while you arrange a replacement vehicle. This type of insurance is suitable if your contract hire agreement holds you liable for all or part of any financial shortfall between the motor insurance payout and the contract hire agreement settlement figure.

It's important to note that not all contract hire agreements require GAP insurance, and the need for it may depend on the terms of your specific agreement. However, if you are held liable for any financial shortfall, Contract Hire GAP insurance can provide valuable protection and help you get a seamless transition to your next vehicle.

Covers up to £250 of your comprehensive insurance excess

When you take out a standard motor insurance policy, you agree to pay an excess amount in the event of a claim. This is an amount you pay towards the cost of the claim, and it is usually divided into two parts: a compulsory excess, set by the insurer, and a voluntary excess, chosen by you.

Contract Hire GAP insurance covers up to £250 of your comprehensive insurance excess. This means that if you need to claim on your insurance, you will be reimbursed for the excess amount you paid, up to £250. This can be especially helpful if you have a high excess amount or want to minimise out-of-pocket expenses when making a claim.

It is important to note that Contract Hire GAP insurance will only cover your excess if your claim meets certain criteria. For example, the claim must be for damage to your car if you are at fault and have comprehensive insurance, or for fire or theft. Claims for breakdowns, windscreen repair or replacement, or incidents outside the UK may not be covered.

Additionally, Contract Hire GAP insurance will only cover your excess if you have fully comprehensive insurance in place for your motor vehicle and have made a successful insurance claim on your motor insurance. You must also have paid your policy excess on the claim before being reimbursed.

By covering your excess, Contract Hire GAP insurance can provide financial protection and peace of mind, ensuring you are not left with a significant financial burden in the event of a claim.

Covers up to 3 months' deposit

Contract Hire GAP insurance is a type of cover that pays the difference between your motor insurer's valuation of the vehicle at the time of claim and the settlement figure of your contract hire agreement. It also reimburses you for the excess deducted by your motor insurer, along with the initial rental you paid at the beginning of your agreement.

In the event of a total loss claim (accident, theft, fire or flood damage), Contract Hire GAP Insurance will cover up to 100% of the outstanding rental payments for the vehicle and any shortfall in the market value settlement provided by the insurer. This means that if your vehicle is declared a total loss, you will be able to clear your outstanding payments with the finance company and receive an additional settlement for the upfront payment.

For an additional premium, you can protect the initial rental/deposit you paid at the start of your agreement, up to a maximum of £3,000. This means that if your vehicle is declared a total loss, you can recover your initial rental payment of up to £3,000. This can cover up to 3 months' worth of deposit, depending on the amount of your monthly payments.

For example, if your vehicle value is £20,000 and the amount owed to the finance company to end the finance agreement is £18,000, but your comprehensive market value insurance payout is only £10,000, Contract Hire GAP Insurance will pay out the £8,000 shortfall. This leaves you clear of any owed finance on your vehicle and ready to purchase a new vehicle.

Covers the difference between the insurer's settlement offer and the early termination charge

Contract Hire GAP insurance is a type of cover that pays the difference between your motor insurer's valuation of the vehicle and the settlement figure of your contract hire agreement. This type of insurance is suitable for leased vehicles and is available for up to 5 years for vehicles on lease or contract hire.

In the event of a total loss claim (accident, theft, fire, or flood damage), Contract Hire GAP Insurance will cover up to 100% of the outstanding rental payments for the vehicle and cover any shortfall in the market value settlement provided by the insurer. This means that if your vehicle is declared a total loss, you will be able to clear your outstanding payments with the finance company and receive an additional settlement for the upfront payment.

For example, if your vehicle value is £20,000 and the amount owed to the finance company to end the finance agreement is £18,000, but your comprehensive market value insurance payout is only £10,000, Contract Hire GAP Insurance will cover the £8,000 shortfall. This leaves you clear of any owed finance on your vehicle and ready to order a new vehicle.

Contract Hire GAP Insurance also covers up to £250 of your comprehensive insurance excess and, for an additional premium, can protect your initial rental/deposit of up to £3,000. This means that if your vehicle is declared a total loss, you will receive an additional settlement for the upfront payment, which can be used towards setting up a new contract hire agreement on a replacement vehicle.

The policy is available for up to 365 days after the delivery of the vehicle and allows for any amendments to be made free of charge. It also offers a pro-rata transfer of unused premium if you change your vehicle, with no admin fees.

Frequently asked questions