Of all the insurance products available to the modern motorist, Guaranteed Asset Protection insurance is among the most interesting. It solves the problem of depreciation in new cars, though it does come slightly more expensive than some of the alternatives.
Let’s look at GAP insurance, whether it’s right for you, and how you might finance it.
What is contract hire GAP insurance?
GAP insurance is a cover that makes up the difference between the price you paid for the vehicle and its value when you made a claim. This means that if you buy a new car for £20,000 and crash it soon afterward, you’ll be covered for the full £20,000, not just for your insurer’s valuation of the car soon afterward. In this sense, it’s a hedge against depreciation.
Contract Hire GAP Insurance is a specialized form of GAP that covers vehicles the driver doesn’t own. Rather than covering the total value of the car, it covers all the outstanding monthly payments and any fee you paid at the beginning of the lease.
How does Contract Hire GAP Insurance work?
If your car is considered a total loss, you might find yourself out of pocket. This is because your insurance, as standard, will only cover the value of the vehicle at the point that it was written off – not the price you paid for a new vehicle. The result is that many might find themselves in negative equity.
Contract hire GAP insurance seeks to pay the difference between the amount you owe to the rental company and the amount you’re getting from your insurer. In other words, you’ll be completely protected against the harshest financial consequences and able to drive with confidence!
Do I require Contract Hire GAP Insurance?
From the moment you drive your car off the forecourt of a new-car dealership, it will have depreciated by a considerable chunk. GAP insurance is designed to solve this creates a risk for you, the motorist. It acts as a supplement for your motor insurance, guarding against the possibility of getting into financial trouble.
Of course, you’ll have to pay extra every month to benefit from the additional cover. Whether this is appropriate in your case will depend on your judgment and your assessment of the risk you’re taking.
Naturally, there are many different variants of this formula, and you’ll need to check the small print of any agreement before signing. Some might limit the type and value of vehicles they’ll cover. If you’re in the market for a newly rented car, in other words, it’s something worth considering.
