What is Contract Hire GAP insurance?
If your car is written off, this type of cover aims to pay 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 will also reimburse you up to £750 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.
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Our customers saved
On average
£157
At most
£756
Largest claim paid
£11,755
Average claim paid
£2,579
How does Contract Hire GAP insurance work?
If your vehicle is the subject of a Contract Hire / Lease agreement and is declared a Total Loss (written off) through accident, fire, theft or flood your Motor Insurer will pay out only what they think your vehicle is worth at the time of claim.
In the meantime your finance company will have calculated their settlement figure which, would normally be a combination of some or all of the following:
- The amount that the finance company think your vehicle was worth at the time of loss
- The sum of anything up to 100% of the as yet unpaid rentals under your Contract Hire agreement at the time of loss.
- Administration & or penalty fees for wrapping up the agreement early.
Your motor insurance pay-out might well fall short of this figure. If it does your finance company might hold you liable for anything up to 100% of the shortfall and this where Contract Hire GAP insurance steps in... to pay the difference between your motor insurer's valuation of the vehicle and the amount required to settle the remaining balance of your Contract Hire agreement.
In addition, our policies cover up to £3,000 of the initial rental you paid as part of your Contract Hire agreement, meaning that you'd be reimbursed some or all of your initial rental for you to use against the cost of setting up a new Contract Hire agreement on a replacement vehicle.
If you need assistance determining whether this type of cover is suitable for your needs, please contact us.
Policy documents
Add a little TLCc to your GAP insurance:
Total Loss Courtesy Car
If your vehicle is damaged in an accident, your motor insurance policy will normally provide you with a courtesy/hire car whilst the damage to your vehicle is being assessed.
If they determine that your vehicle is repairable, you would normally have the use of that courtesy car for the duration of the repairs.
However...
If they decide that the damage to your vehicle is beyond repair and subsequently declare it a Total Loss (they write it off), you would then not normally be entitled to their courtesy car any longer (unless you've paid them an additional premium for such entitlement) and, it would be withdrawn: leaving you without the use of a vehicle.
Depending on how much longer they take to settle your claim, you might be without a vehicle for a number of days - or even weeks!
Building in Total Loss Courtesy Car cover (TLCc) to your GAP insurance policy with us, means that in the event your car is declared a Total Loss, we will provide you with a courtesy car for you to use for up to 28-days.
TLCc Cover Features:
The car provided:
- Will be of a similar sized engine to Your vehicle that was deemed a Total Loss (limited to a maximum of a 2.0 litre manual car or equivalent)
- Will be insured. Please note that an excess (normally £250) will apply to accidents/claims occuring during your use of the courtesy car. Exact terms will confirmed prior to you accepting delivery of it.
- Will be able to be delivered to and collected from your home or place of work.
For more information please review the Ts & Cs of our GAP insurance policies here, or generate a quote.
Do I need Contract Hire GAP insurance?
Contrary to what your motor dealer and/or finance broker might tell you when trying to sell you their often much more expensive GAP insurance policy, not all Contract Hire agreements require GAP insurance. If you refer to the section above (how the finance company calculate their settlement figure) there'd almost always be a "shortfall" between the amount paid out by your motor insurer and the settlement figure calculated by the finance company.
However, as we touch on above, how much of that shortfall that you're actually liable for can vary considerably from one finance company to another. In terms of your potential liability, we've seen Contract Hire agreements which, in the event of the car being written of, hold "you" liable for:
- All of the shortfall
If your Contract Hire agreement is such that you would be held liable for every single penny of any financial shortfall between the motor insurance pay-out and the Contract Hire Agreement settlement figure, we'd recommend that you take out a GAP insurance policy because the amount of any shortfall (particularly in the event of an early write-off) could well be substantial.
- Some of the shortfall
We've seen Contract Hire Agreements which specify that you're only liable for a specific percentage of the financial shortfall. We've also seen an agreement which said that the individual was only liable for a nominal £25 per monthly rental that had not yet been which would have fallen due if the vehicle had not been written off.
If your Contract Hire Agreement holds you liable for some of the financial shortfall, the requirement for GAP insurance is not necessarily entirely negated, but it could well mean that a shorter policy would be more prudent for your needs. Not forgetting that you may well want to insure some or all of the initial rental that you paid when you started the lease agreement (see above).
- None of the shortfall
This is far more common than many people think - in some cases even the motor dealers and/or finance brokers that are trying to sell you their usually much more expensive GAP insurance policies don't seem to be aware of it. One of our company directors recently leased a vehicle via a motor dealer which is part of a large, nationwide franchised dealer group and after taking delivery of the vehicle was on the receiving end of a number of letters and phone calls inviting him to purchase GAP insurance for £400.
When pressing them on whether the GAP insurance policy was necessary they insisted it was (numerous times) until he pointed out to them that the Contract Hire agreement they'd provided (and which was now in force) specifically outlined that he wouldn't be liable for any of the financial shortfall - albeit (we must stress) not accounting for any fees that may have come about through arrears, maintenance and excess mileage fees.
Nevertheless, if you have a Contract Hire agreement which doesn't hold you liable for any of the financial shortfall between motor insurance pay-out and settlement figure (arrears, maintenance and excess mileage fees aside), the need for GAP insurance is substantially reduced. You may even decide not to buy GAP insurance at all.
It's worth noting though that you may well still choose to take out a GAP insurance policy to cover some or all of your initial rental.
Still Unsure If You Need GAP insurance?
If you're still not sure whether you need Contract Hire GAP insurance please contact us for assistance and we'll be more than happy to guide you through the process of arriving at the most appropriate type of cover for you, with absolutely no obligation on your part
Am I eligible for Contract Hire GAP insurance?
You can buy Contract Hire GAP insurance to cover a New or Used car that:
- Is covered by a comprehensive motor insurance policy.
- You are named on the lease/contract hire agreement of.
- Is less than ten (10) years old at the start date of this policy.
- You have NOT changed in any way from the vehicle manufacturer's standard specification, unless the vehicle has been modified for mobility purposes. This would include changes to the bodywork, such as spoilers or body kits, changes to the suspension or brakes, and changes affecting performance such as engine management. Graphics applied to your vehicle are acceptable.
- Has not previously been declared a Total Loss and is not already the subject of a previous incident or existing motor insurance claim which could yet result in it being declared a Total Loss.
- Has a minimum of 12-months left to run on the lease.
- Is registered in the UK.
- Has a P11d value of no more than £100,000.
- Is not a commercial vehicle.
- Is not being used for: rallying, racing, any competitive events, off road (including green laning), emergency services use (blue lights), hire (including private hire, taxis and chauffeur) or for driving school tuition.
- Is not already covered by a GAP insurance policy.
- Is the subject of a Contract/Lease Hire Agreement.
- Is not a specifically excluded vehicle.
- Is not a van, car derived van, motorcycle, motorhome or campervan.
So long as you:
- Are a permanent resident of the United Kingdom (England, Wales, Scotland, Northern Ireland, Channel Islands and the Isle of Man), or a UK registered company.
You can NOT buy Contract Hire GAP insurance for a vehicle that:
- Is not covered by a comprehensive motor insurance policy.
- You are not named on the lease/contract hire agreement of.
- Is more than ten (10) years old at the start date of this policy.
- You have changed in any way from the vehicle manufacturer's standard specification, unless the vehicle has been modified for mobility purposes. This would include changes to the bodywork, such as spoilers or body kits, changes to the suspension or brakes, and changes affecting performance such as engine management. Graphics applied to your vehicle are acceptable.
- Has previously been declared a Total Loss or, is already the subject of a previous incident or existing motor insurance claim which could yet result in it being declared a Total Loss.
- Has less than 12-months left to run on the lease.
- Is not registered in the UK.
- Has P11d value of more than £100,000.
- Is a commercial vehicle.
- Is (or will be) used for: rallying, racing, any competitive events, off road (including green laning), emergency services use (blue lights), hire (including private hire, taxis and chauffeur) or for driving school tuition.
- Is already covered by a GAP insurance policy.
- Is not the subject of a Contract/Lease Hire Agreement.
- Is a specifically excluded vehicle.
- Is a van, car derived van, motorcycle, motorhome or campervan.
Contract Hire GAP insurance policy features.
- Aims to pay the difference between your motor insurer's valuation of the vehicle at the time of claim and the amount required to settle the outstanding balance of your Contract Hire Agreement.
- Ability to cancel the policy at any time and receive a daily pro-rata refund of unused premium (a cancellation fee may apply).
- INCLUDES cover for reimbursement of up to £3,000 of the Initial Rental you paid as part of your Contract / Lease Hire Agreement.
- OPTION to include the provision of a courtesy car for you to use for up to 28-days in the event your vehicle is a declared a total loss.
- Underwritten at Lloyd's by Arch Managing Agency Limited.
- Available for Cars up to 10 years old.
- ALL named drivers on the Motor Insurance policy, covered.
- Available so long as there's more than 12-months remaining on your lease
(unless you already have Contract Hire GAP insurance with us, you're extending your lease and require further cover). - Pays up to £750 towards the excess on your Comprehensive Motor Insurance policy.
- FREE transfer of any unused premium on to a new policy on a replacement vehicle.
- Available for Cars with a P11d value of up to £100,000.
- Policy durations of up to 5 years available.
- Claim Limits of up to £75,000 available.
- FREE policy amendments.
- NO Market Value clauses.
| Feature | Details |
|---|---|
A-Rated Insurer? |
|
ALL named drivers on your motor insurance policy, covered? |
|
NO Pre-Approval clause with penalty? |
|
Total Loss Courtesy Car available? |
Subject to an additional fee being paid.
|
Covers some or all of the Initial Rental you paid? |
Max £3,000 |
Initial Cooling Off Period? |
30-days |
Pro-Rata rebate of unused premium if you cancel outsde of the initial Cooling Off Period? |
Daily Calculation |
| Transferable? If you sell your vehicle and have not claimed on your GAP insurance policy, can the unused portion be transferred forward on a new vehicle? |
We will cancel your policy and allow you to transfer forward, the financial value of the remaining period of your cover, against the cost of a new policy on a new vehicle. No cancellation, transfer or admin fees will apply. |
| Will pay towards your Motor Insurance excess in the event of a successful Total Loss claim? | £750 |
| NO Market Value clauses? A Market Value clause permits the claim administrator to reduce the amount of your claim based either on their belief that you paid too much for it when you originally bought your vehicle or, if your motor insurer pays out less than they think your car is worth at the time of claim - potentially both. Where possible you should avoid any GAP insurance policy that has one or more market value clauses permitting such a reduction in the amount of claim. |
None |
| Maximum age of vehicle that can be covered? | 10 years old |
| Maximum vehicle value? | £100,000 |
| Maximum Claim Limit available? (Subject to the vehicle value) |
£75,000 |
| Maximum duration of cover available? | 5 Years |
Is there a cancellation Fee if cancelled outside of the initial Cooling Off Period? |
£15.00 Waived if a new policy is purchased.
|
How long after taking delivery of the vehicle, do have to buy GAP insurance? |
Any time. So long as there's a minimum of 12 months remaining on your lease (or a minimum of 6-months remaining if it's a 1-year lease) |
| Available for both New and Used vehicles? | |
Allows for vehicles to be modified? |
Recent Contract Hire GAP insurance claims
Below are a selection of our most recent Contract Hire GAP insurance claims:
BMW X5
- Length of ownership:
- 23 Months
- Policy Cost:
- The policy cost £287.62 (8.85% of the amount the policy paid out.)
Kia e-Niro
- Length of ownership:
- 27 Months
- Policy Cost:
- The policy cost £138.43 (1.54% of the amount the policy paid out.)
Volkswagen ID.4
- Length of ownership:
- 16 Months
- Policy Cost:
- The policy cost £115.89 (46.36% of the amount the policy paid out.)
Hyundai Ioniq
- Length of ownership:
- 28 Months
- Policy Cost:
- The policy cost £135.21 (2.69% of the amount the policy paid out.)
Hyundai Tucson
- Length of ownership:
- 22 Months
- Policy Cost:
- The policy cost £128.77 (51.51% of the amount the policy paid out.)
Hyundai Tucson
- Length of ownership:
- 14 Months
- Policy Cost:
- The policy cost £146.10 (4.50% of the amount the policy paid out.)
Volvo XC40
- Length of ownership:
- 14 Months
- Policy Cost:
- The policy cost £124.19 (3.14% of the amount the policy paid out.)
Subaru Solterra
- Length of ownership:
- 1 Months
- Policy Cost:
- The policy cost £229.87 (27.11% of the amount the policy paid out.)
Tesla Model 3
- Length of ownership:
- 5 Months
- Policy Cost:
- The policy cost £196.50 (2.31% of the amount the policy paid out.)
Hyundai Tucson
- Length of ownership:
- 19 Months
- Policy Cost:
- The policy cost £135.21 (7.34% of the amount the policy paid out.)