A quick guide to GAP insurance
GAP insurance could make all the difference if you have an accident in your lease car or if it’s stolen.
If you’ve been looking into leasing a vehicle then it’s more than likely that you’ll have come across the phrase ‘GAP insurance’. While many potential lessees are familiar with the phrase, it’s not always clear exactly what GAP insurance is, if you need it and how it can help you when it comes to leasing a car.
GAP insurance can be quite confusing to comprehend but it can be explained in fairly simple terms. GAP insurance is an optional insurance policy which can be taken out by motorists to protect them should anything happen to their lease car.
If your lease vehicle is ever written off or stolen there is a high risk that you could end up owing your finance company a higher amount than the insurance company will pay out. This is due to the fact that the insurance company will only pay you ‘market value’ for your lease vehicle – this figure could be much smaller than you expect due to the quick depreciation value of brand new lease vehicles.
If this situation does occur (and it very often does) then the lessee is personally responsible for settling the shortfall or gap. This could easily mount up to thousands of pounds which many motorists simply don’t have in expendable capital. In this situation, GAP insurance can really help out. Your GAP insurance policy will pay the shortfall you owe – this means they’ll settle the difference with the finance company.
GAP insurance gives you the chance to get another car without still owing money on your previous vehicle. GAP insurance is not a mandatory insurance option however it can mean the difference between keeping your finances in the black or sending them into the red. In addition to being taken out by lessees, GAP insurance is also taken out by motorists purchasing a new vehicle on finance.
Many people choose to take GAP insurance to protect them in case of any accidents or unpredicted incidents, however there are some who feel that this is just an unnecessary outgoing. GAP insurance policies are usually priced at between £299 and £799 and while this might not sound that pricey, there are many who think that this is an extra cost that they simply don’t need to pay.
So is GAP insurance really necessary? When it comes to car leasing I’d say absolutely. It’s well known that new cars depreciate in value extremely quickly which is part of the appeal of leasing – leasing takes away the depreciation worries that come with traditional vehicle purchasing however, should your car be damaged beyond repair or be stolen it’s worth knowing that you’re protected. At a time when every penny counts, I think it’s a good idea to protect yourself from paying out large, unanticipated fees should an unexpected incident occur.
Some finance companies include GAP insurance in their leasing agreement however many don’t so it’s always worth checking the exact terms and conditions before you sign up to a leasing agreement. GAP insurance policies can vary in price and content so it’s recommended that you scour the market to find the right policy to suit your individual driving habits.
If you’re still not sure about GAP insurance then there are hundreds of experts in the leasing market who should be able to give you a comprehensive break down of GAP insurance and how it could be beneficial to you, your business or your family.