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Lease and Contract hire Gap Insurance

 

Lease & Contract Hire Gap Insurance is designed to cover the difference between your motor insurance market value settlement, if the car is written off, and the outstanding lease settlement at point of loss

 

The key features of GapInsurance123 Lease & Contract Hire Gap Insurance

These will include:

 

  • Simple cover pays the difference between your car insurers settlement, at point of total loss, and the outstanding lease or contract hire settlement. No claim limit applies.
  • Gap Insurance that pays off a shortfall to your finance company
  • Up to 4 years cover available - for vehicles up to £75,000 purchase value.
  • £250 towards your own motor insurance excess - If the vehicle is written off, there is no excess on our policy to be deducted. We pay the first £250 of your vehicle insurance excess.
  • Clear commitment to settle your claim within 15 working days of your motor insurers settlement (within the terms and conditions of your policy)
  • Covers All Factory Fitted Options
  • Includes cover for up to £1,500 of dealer fitted accessories
  • Covers theft with keys
  • You can buy cover up to 90 days after vehicle purchase from your dealer.
  • It covers all named drivers over the age of 21
  • Underwritten by a consortium of Lloyds of London Syndicates under Arch Managing Agency Limited
  • The underwriter carries an 'A' financial strength rating by all well know ratings agencies.

 

 

What is Lease & Contract Hire Gap Insurance and why do you need it?

Lease & Contract Hire Gap cover is different from most other types of Gap Insurance you can buy. That is because it is designed to cover a financial arrangement that is also different to many others.

With a Contract Hire or lease agreement you are effectively committing to a fixed term rental arrangement. The key aspect is that you have no option to own the vehicle written into the lease agreement. This is different from the likes of PCP and HP, where you can own the the vehicle by paying off the finance settlement.

This means that if the car is written off or stolen, and declared a total loss, during the lease term then you will be left with the lease settlement to pay off. You may need contract hire gap cover to clear any shortfall.

 

How does Lease & Contract Hire Gap Insurance help you when your vehicle is written off?

 

If your car is in an accident, stolen or set on fire, and declared a total loss by your motor insurer then you should receive the market value for the vehicle in settlement. That is to say, your fully comprehensive motor insurance policy, instead of repairing or replacing the car, they pay you what it would cost to replace the vehicle with the same age and mileage at that time.

However, you still have a lease settlement to pay off to the finance company.

The issue is that your will be asked to pay off your lease for the car that has been written off. If the market value settlement from the car insurance is not enough to pay off your lease settlement then this shortfall is required from you, the leaseholder.

This is where a Contract Hire Gap Insurance policy can step in. Simply put, the gap insurance cover can pay the difference between the motor insurers pay out and the outstanding lease settlement. The lease settlement figure is also known as the lease early termination fee.

 

What is a Contract Hire Lease and why is it different?

A Contract Hire lease (also known as lease hire) is a fixed term rental arrangement between a finance company and either a private individual or a business.

A contract hire lease agreement is normally made up of two elements

 

  • the advanced rental payment (effectively a deposit)
  • fixed monthly rentals

 

The advanced rental is the initial rental payment commonly taken in the first month you have the vehicle. The advanced rental is often simply calculated as a multiple of months (3,6 or 9 monthly rentals, for example).

If you are looking to lease a car, the contract hire agreement for a car will give you all the details of how much your rental payments are and any advanced rental deposits you need to pay.

Contract Hire agreements also differ by what happens at the end of contract. As you have no option to own the vehicle, written into the lease but you will have a contract early termination fee. This means that if you were to terminate your lease early, for example, after six months of leasing the car contract hire contract will state that you would then need to pay this fee.

This early termination fee is simply the settlement you need to make to end the lease early. This includes when the car is written off or stolen during the lease period.

 

Is Gap Insurance recommended on a lease?

To be clear, no Gap Insurance policy is obligatory for any car purchase, it is a choice of the lease holder whether they need contract hire gap cover for their contract hire agreement.

What you may want to consider is the position you may be in if your car is written off during the period of the lease.

If the vehicle is written off or stolen then your motor insurance will cover the cost of the then replacement cost. So if the vehicle is 2 years old, with 20,000 miles on the clock then the market value settlement will be for a 2 year old, 20,000 miles example then.

This may not be enough to clear your lease settlement at that time. The lease settlement (also know as the early termination fee) can be made up of the outstanding rentals still to pay on the lease and the vehicle residual value.

So if your motor insurance settlement does not equal the lease settlement then the shortfall is still payable by you.

This means you may have to find the money to pay off the lease AND you still have to replace the vehicle.

Lease & Contract Hire Gap can take care of the shortfall you have to pay, clearing the lease and leaving you with just a new car to secure.

So is Lease & Contract Hire Gap recommended? If you don't like the idea of having to pay towards a vehicle you no longer own then the answer could be a resounding 'yes'!

 

I have new car replacement on my motor insurance, do I need Lease & Contract Hire Gap too?

 

This is a great question that comes up time after time with people we speak to.

New car replacement cover is where your motor insurer, usually in the first year of your having the vehicle, will provide you with a brand new replacement vehicle if they write off the vehicle in that time.

Sounds great, but there are normally a number of criteria you must reach in order for you to qualify for this new car replacement cover.

These criteria can often mean that vehicles on a Lease or Contract Hire agreement CANNOT qualify for new car replacement.

These include:

  • You are the first registered keeper for the vehicle
  • Your own the vehicle
  • Any other party with an interest in the vehicle must agree to it's replacement

 

There can be others but let's look at each of these examples in turn.

You are the first registered keeper for the vehicle

With a contract hire agreement the leasing or finance company are normally the registered keeper, not the leaseholder.

You own the vehicle

With a Contract Hire lease you are not the owner of the vehicle. Nor do you have the option to own written into the lease agreement. With HP, PCP or outright purchase you can own, not with contract hire.

Any other party with an interest in the vehicle must agree to it's replacement

In the case of a contract hire lease the leasing or finance company have an interest in the vehicle. After all, they effectively own it and are renting it to the lease holder.

If the vehicle is written off the leasing company would have to agree to a new vehicle as settlement. This would mean they would have to draw up a new lease agreement as the old one was for a vehicle that no longer exists.

Would they agree to this? You would have to talk to your leasing company to find out.

However, with any one of those criteria (plus any more than your motor insurance may have) meaning your new car replacement eligibility is not met, it may be unlikely you would qualify for such cover on a contract hire vehicle.

We urge anyone considering reliance on new for old replacement cover to talk to their motor insurer and leasing company first.

 

Can I take out Lease & Contract Hire Gap anytime during my lease?

No. With a GapInsurance123 Lease & Contract Hire Gap Insurance policy you must take the policy out within 90 days of you receiving the vehicle. Anything outside that period and we are unable to provide cover.

All providers are different so you may find alternative cover elsewhere. For example, our sister websites at Totallossgap.co.uk and EasyGap.co.uk provide similar contract hire gap insurance cover with up to 180 days allowed from vehicle receipt and policy purchase.

 

Will GapInsurance123 Lease & Contract Hire Gap Insurance policy work with PCP finance?

No, certainly not the Lease & Contract Hire Gap Insurance cover from GapInsurance123. As you can own the vehicle with a PCP agreement we would recommend a more suitable option for cover.

Either Combined Return to Invoice Gap Insurance or Combined Vehicle Replacement Gap insurance policies would be more effective for a Personal Contract Purchase finance agreement. Looking to buy gap insurance for a PCP agreement is sensible. However, being able to protect the purchase price or vehicle replacement cost provides more options than just covering the financial shortfall.

 

What happens if I don't have Contract Hire Gap Insurance and my vehicle is written off?

If you do not have a Contract Hire Gap policy in place, and your lease vehicle is declared a write off and a total loss by your motor insurance company, then your lease settlement will have to be met just by your motor insurers settlement.

Your motor insurance company may meet the current market replacement value for the vehicle, but they do not have to meet the lease settlement amount.

If the lease settlement is more than the motor insurance settlement then the leaseholder has to pay the outstanding finance amount.

 

Where can I buy Lease & Contract Hire Gap Insurance?

There are a number of places you can look to buy suitable Gap Insurance cover for your lease vehicle.

These include:

  • Specialist Gap Insurance brokers - Using a specialist Gap Insurance broker like GapInsurance123 will provide you with a range of Gap products to choose from. This means you can normally tailor your requirements for what you want to protect yourself with. You may also find the lowest premiums are found with a specialist broker.
  • Leasing Company - the supplying leasing company your are receiving the vehicle from may be able to provide you with a suitable lease gap policy. However, often the premiums are higher than the independent market with a specialist broker.
  • Supplying motor dealer - the motor dealer who is supplying the vehicle may be able to provide you with Gap cover also. Motor dealers have a reputation for higher premium prices, and potentially much less options for cover.

 

 

Is Lease & Contract Hire Gap the same as Return to Invoice Gap?

No, they are quite different. If your lease vehicle is declared a total loss then a lease gap policy simply pays off any shortfall between the motor insurance settlement and the lease company's finance settlement.

Return to Invoice Gap is designed to pay the difference between the motor insurance settlement and the original invoice price paid for the vehicle. As you do not have an invoice for the purchase of the vehicle in the name of the lease holder, Return to Invoice Gap is not applicable. You cannot claim the invoice price for something you do not own.

 

Why is Lease & Contract Hire Gap cover cheaper at GapInsurance123 than my motor dealer or leasing company?

 

If you are looking for Lease & Contract Hire Gap Insurance, you can compare premiums and terms from several providers. If you get a Gap Insurance quote from your motor dealer or leasing company and compare that to GapInsurance123, you may find quite a difference in a premium price.

There are a couple of reasons for this:

Commission margins: GapInsurance123 works to fixed, low commissions per policy sale. The GapInsurance123 business model is to sell many policies at low margins per sale.

Economy of scale: The motor dealer or leasing company has no access to the open market for Gap Insurance sales. Effectively, a motor dealer or leasing company can only offer Gap Insurance policies to a customer they have provided a contract hire vehicles to.

 

Who are GapInsurance123?

  • GapInsurance123 is a trading name of Aequitas Automotive Ltd.
  • Aequitas Automotive Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom (F.C.A. reference number 821163).
  • Aequitas Automotive Ltd is a registered company in the U.K. Our company registration number with Companies House is 006652.
  • Aequitas Automotive Limited has a registered office at Aequitas House, 56 Hamilton Square, Birkenhead, Merseyside, CH41 5AS.
  • Aequitas Automotive Ltd is a registered insurance broker with the British Insurance Brokers Association (BIBA) membership number 006652.

 

Who is the insurer of the Lease & Contract Hire Gap from GapInsurance123?

 

From August 2021, the insurer of all Gap products has been arranged on behalf of Gapinsurance123.co.uk by Avid Insurance Services Limited under contract reference B1406C000522100.

 

Avid Insurance Limited is an agent of Arch Managing Agency Limited.

 

Arch Managing Agency Limited underwrite this policy on behalf of a consortium of Lloyd's of London syndicates.

 

Arch Insurance International

 

Arch Capital Group Limited provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly-owned subsidiaries.

 

Business in the U.K. is written by Arch Insurance (U.K.) Limited and/or Arch Underwriting at Lloyd's Ltd.

 

Built on Strength

 

With strong ratings for A-rated financial strength from A.M Best, Standard & Poor's and Fitch, Arch Insurance International represents a stable alternative for brokers and customers seeking fresh capacity.

 

Arch Underwriting at Lloyd's Ltd (registered in England and Wales – number 06645822) is authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and Financial Conduct Authority.

 

Arch Insurance (U.K.) Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the U.K.

 

Registered Office: 5th Floor, 60 Great Tower Street London EC3R 5AZ

 

Telephone +44 (0)20 7621 4500

 

Please visit www.archinsurance.com for further information.

 

How is the Lease & Contract Hire Gap Insurance from GapInsurance123 protected?

 

Your GapInsurance123 Gap policy aims to provide you with peace of mind all the way.

 

In terms of the policy, the protection comes from the strength of the underwriter being A-rated and a Lloyds of London syndicate.

 

GapInsurance123 as a brand has over a decade of experience in the field of Gap Insurance. The brand is a trading name of Aequitas Automotive Ltd, a specialist broker who runs many brands in the ancillary motor product field.

 

Aequitas Automotive Ltd is directly authorised and regulated by the Financial Conduct Authority and carries net assets well above £1 million at company's house.

 

Finally, protection by the Financial Services Compensation Scheme is available for qualifying customers, should the insurer fail to meet their obligations.