Will My PCP Deal Include Insurance?
More often than not, insurance won’t be included with your PCP (Personal Contract Purchase) deal, but you will still be responsible for making sure the vehicle is insured before you take it out on the road.
Is insurance included with PCP deals?
A PCP car finance agreement involves hiring the vehicle for a set period while you make monthly payments to cover the cost of the loan.
More often than not, insurance won’t be included with your PCP deal, but you will still be responsible for making sure the vehicle is insured before you take it out on the road.
If you don’t properly insure the car, this can lead to a variety of difficult situations. For example if you wrote the car off, you will not receive any payout from an insurance company – but you will still be required to pay off the value of the loan.
Insurance packages with PCP
Some providers do actually offer insurance as part of the finance agreement but these are fairly uncommon. A sum will be added to your monthly payments to cover the cost of the policy. So you won’t have to go and insure the car separately.
This is designed to reduce costs for drivers, as well as eliminating the added stress of searching through insurance policies yourself. We would always recommend comparing the two methods though to make sure the package does in fact work out cheaper.
Peugeot’s Just Add Fuel is among the most common, and its name tells you everything you need to know. The only thing you have to pay for outside of your monthly payments, is fuel. Similar packages are offered by Citroën and Volvo on certain models.
Prices are dependent on a range of factors such as the model, your age and previous driving history – no different than regular insurance policies.
So what insurance policy do I need for my PCP deal?
As the finance provider is still the registered owner of the car until you pay the balloon payment, they will want to protect the car. That means you will be required to take out fully comprehensive insurance on the financed vehicle.
This is the most expensive type of insurance but will cover you fully in the case of any accidents involving your car, yourself, other people and their car.
What’s included in insurance?
As the highest rate of cover, fully comprehensive insurance will include cover against the following:
- Damage to other people’s cars and other property
- Passenger’s injuries
- Yourself and your car
- Windscreen repairs
- A courtesy car where necessary
However, the exact details of insurance policies will differ between insurers – so it is important that you check the documents of each policy offered to you.
What isn’t included?
There are some cases whereby an insurer will not cover you or may even void your policy. These can include:
- Driving while under the influence of alcohol or drugs
- Putting the wrong fuel in your car
- Someone not included on your policy driving the vehicle at the time of an accident
How to insure a car on PCP?
Thankfully, insuring a car you are financing through a PCP car finance arrangement is no more difficult than insuring a car you have bought.
If you decide to take out one of the few manufacturers insurance policies alongside the hire then it is even easier. If you opt for insuring your car through a third-party, there are four simple steps to follow to get yourself safely behind the wheel.
1. Get a quote
The huge variety of insurance companies out there means that it is worth shopping around to try and find the best quote.
To proceed with comparing quotes you will need to input your registration number and other personal details to give the insurers a grasp of your situation. Allowing them to accurately provide you with a quote.
It’s important that you inform the insurance provider that you are not the legal owner of the car, otherwise you risk invalidating your policy and being refused a payout if the worst happens. This will be a section in the form that you can fill out easily before getting a quote.
2. Make sure your dates are right
When taking out insurance on a PCP financed car, it’s important that you specify the right start date on your policy to ensure that you are covered from the day your new car arrives. Equally, you will want to make sure that you are covered right up until the day the car is returned to the provider. That way you won’t be driving it around uninsured at any point.
So be sure that you have the right delivery and return dates for your car before you take out an insurance policy.
3. Compare prices
Once all of your details are confirmed, you are then free to compare prices from a range of providers.
It can be tempting to look at just the price of these policies alone – but there are additional factors that you should consider:
- Courtesy cars – will the insurer provide you with a replacement car if yours is being serviced?
- Windshield repair – make sure to check whether this is included in your policy as some may not include it.
- Breakdown cover – similar to windshield repair, some companies may offer this as an added extra so make sure to check beforehand.
- Black box insurance – This requires a small black box to be fitted in the car that monitors your driving. Speeds and times of driving will be used to assess the cost of your insurance and often reduce the cost of a policy if your driving reduces the risk of an accident (e.g. sticking to speed limits).
4. Decide how you want to pay
Depending on your budget and preferences, you can pay your insurance policy off monthly, or in one lump sum.
If you opt for monthly payments, then you will likely pay interest on the payments, making the policy slightly more expensive over the duration of your cover. Providers will often require a small deposit upon confirmation of your policy.
Paying the insurance off in one go is often not possible for many drivers, but if you can afford to it will eliminate the interest payments and work out a little cheaper in the long run.
Once you have made a decision, all that’s left to do is finalise your payments details with your chosen provider.
What is GAP Insurance?
Guaranteed Asset Protection (GAP) insurance is something that may be worth considering when you hire a car using a PCP car finance agreement.
GAP insurance simply protects you against any outstanding finance on your vehicle if the car is written off or stolen.
For example, if you still owe £6,000 on your car but it is actually only worth £5,200, your insurance provider will only pay out the value of the car. Therefore instead of footing the £800 bill yourself, your GAP insurance policy will have you covered.
Need peace of mind for your car on finance? We’ve partnered with the UK’s number one GAP insurance provider, DirectGap, to offer you cover from 1-5 years on Hire Purhcase, Personal Contract Purchase and Personal Contract Hire (leasing) agreements.
Do I need GAP insurance?
If you have hired a brand new car, it is likely the value of the car will drop lower than your outstanding loan, at least in the early stages of the agreement. The same applies if you put down a smaller deposit – because there is more value to pay off to begin with.
So GAP insurance is worth considering if you can afford to. It will give you peace of mind that you won’t be left short in the case of an accident.
You can choose to take out a policy through your insurance provider, or opt for a seperate third-party’s policy, as long as they offer GAP insurance.
Want more information on GAP insurance to help you decide if it’s right for you? Check out our other guide and discover whether you need it.
For more details on car leasing and finance, check out our handy guides.