Do You Need GAP Insurance On A Lease Car?
GAP (Guaranteed Asset Protection) insurance is ideal if you lease a car because it covers any outstanding finance on your leasing agreement, should the car be stolen or written off. This means you won’t face any unexpected costs if your main insurer’s payout doesn’t cover the remaining finance.
While GAP insurance isn’t required on a leased car, there are many advantages to having it alongside your primary policy. Read on to find out everything you need to know about leasing with GAP insurance.
What is GAP insurance?
GAP insurance is a form of optional vehicle cover you can choose when leasing a car. Essentially, a GAP insurance policy will bridge the difference between your insurer’s payout and the finance owed on your lease car if it’s declared a total loss.
Unfortunately, main insurers of a lease car will only offer a settlement figure which reflects its worth at the time it’s declared a total loss. So, you can often be faced with a financial shortfall to cover the remaining cost of your agreement, which is where a GAP insurance policy can come in handy.
How does GAP insurance work with a lease?
If your lease car is declared a total loss, GAP insurance pays out the difference between the value of the vehicle at the time of loss and the remaining finance owed on the lease.
You won’t be required to take out a GAP insurance policy by the finance provider of your chosen lease deal. However, it can give you added peace of mind during your agreement if you’re worried about being charged extra for the vehicle in the worst-case scenario.
There are two main types of cover for GAP insurance policies, which are:
- Finance/Contract Hire GAP insurance – the most basic form of cover, which pays the difference between your car insurer’s settlement figure and the outstanding finance due for the lease car.
- Vehicle Replacement GAP insurance – usually the most expensive type of cover. As well as settling your lease car finance, it pays for a replacement vehicle that matches the specification, age and mileage of your previous model.
Is it worth getting GAP insurance?
It’s worth considering GAP insurance if you want complete peace of mind while you’re leasing a car.
Although it’s unlikely that your lease car will ever be written off or stolen, this isn’t to say that it couldn’t happen. In fact, according to an analysis* from Churchill Car Insurance, an average of 384,000 cars are written off in the UK each year. In the same breath, car leasing company Rivervale found that 56,288 cars were targeted by thieves last year after submitting an FOI (Freedom Of Information) request to the DVLA (Driver and Vehicle Licensing Agency).
These are huge statistics and should be considered when you’re deciding whether or not you should take out a GAP insurance policy for your lease car.
*Analysis of Direct Line Group claims data for written off cars (Cat A-D) during the period 2015 – 2016. Direct Line Group’s market share applied to claims data to provide total UK figure
What’s included in GAP insurance?
- Financial cover in the event that your lease car is written off, stolen or declared a total loss.
- The ability to settle your lease finance early without facing hefty charges from your leasing provider.
- Option of one-off annual payment or 12 monthly direct debit payments to ensure affordability.
- Cover for your lease vehicle throughout the entire duration of your agreement
- Cover for taking your lease car abroad*
- Cover for other drivers, providing they are a named driver on your fully comprehensive car insurance policy
*Subject to policies of GAP insurance provider
What isn’t included in GAP insurance?
- Payouts for vehicles written off while a driver is under the influence of alcohol or drugs.
- Cover for vehicles declared a total loss while carrying out fraudulent/illegal activities or wilful negligence (e.g. leaving the vehicle unattended with keys in the ignition).
- If the vehicle is stolen by someone who has access to its keys.
- Cover for lease cars that have been modified.
- Insurance premiums, warranty charges, road tax and fitted extras/accessories* from the dealer.
*Some providers may include cover for any fitted extras/accessories, so be sure to shop around to find the right policy for you.
How much is GAP insurance?
The cost of a GAP insurance depends on a few things, including the value of your lease car, your contract length and the level of cover you wish to have.
As an example, a Toyota Aygo valued at £11,484 which is being leased on a three-year term can be covered with standard Contract Hire GAP insurance for £114* for the entire duration of your agreement.
If you wanted the more inclusive Vehicle Replacement policy, this would set you back a bit more at £189.
GAP insurers have online services which allow you to run a free quote in minutes, so you should shop around before committing to a single provider in order to get the best deal.
*Prices based on GAP insurance policies from Direct Gap.
How long does GAP insurance last for?
You can specify a GAP insurance policy to last anywhere from 1-5 years, depending on how long your lease agreement is for.
On average, most GAP insurance cover lasts three years, as this tends to be the most popular lease term for Personal Contract Hire agreements.
How do I get GAP insurance for a lease car?
Most GAP insurance providers have websites which allow you to configure and pay for your policy in one place, just like you would when arranging your main comprehensive cover. Alternatively, most of them have sales teams which you can pick the phone up to and sort everything this way.
Remember to check the policy information of each GAP insurance quote you look at when shopping around. Even if the quote you see looks good on paper, it’s important to make sure that it has everything you need before signing on the dotted line. For example, you’ll need to look at paying more if you want your lease car to be replaced and this process to be paid for.
Want to find out more about lease car insurance? Check out our other insurance guides for everything you need to know about cover for lease vehicles.