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Contract Hire Gap Insurance Questions.


The number of cars sold via contract hire in the UK fluctuates yearly. Still, automotive experts estimate that around 30-40% of all new car registrations are through some form of finance, including contract hire. This percentage translates to hundreds of thousands of vehicles each year.


This means that in the UK, Contract Hire Vehicles and Contract Hire Gap Insurance are big business, and the flexibility they offer makes them more popular year after year.


This popularity is also not just for businesses who want to make tax-efficient choices but also with members of the general public who recognise the advantages of a lease-hire vehicle.


When you Google Contract Hire gap insurance, you'll find yourself inundated with a wealth of information from various sources. In this sea of data, it is easy to become confused and sometimes be guided by misinformation.


At Total Loss, we have been a trusted provider of Contract Hire gap insurance to the General public since 2010, when we first entered the online Gap insurance Market. Gap insurance is our area of expertise, and we are committed to making sure you have all the factual information you need to make informed choices.


However, we've noticed a pattern in our conversations with prospective gap insurance policyholders: Specific questions are asked repeatedly.


Why do you need Contract Hire gap insurance if your lease vehicle can never be yours?


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How does Contract Hire Guaranteed Asset Protection work?


This level of gap insurance is a simple level of coverage to understand; we say this because

  • The vehicle is not yours
  • The vehicle can never be yours
  • Your provider may have said that you can potentially buy the vehicle at the end of your agreement, but this is not a contractual right.

This means we can not protect the invoice price or replacement cost as it is not yours to protect.

Instead, your gap insurance policy will pay the difference between your insurance company's market value settlement and the amount outstanding on your finance agreement. Your Gap Insurance will also contribute towards your motor insurance companies' excess. Please remember that just because your lease vehicle is not regierted to you does not mean that you can not be affected by potential depreciation.  


Your lease company or provider will have set your rentals based on what they foresee your vehicle to be worth at the end of your contract with a predicted mileage. If they get this value wrong and you give them an asset back at the end then it is their responsibility. It is your responsibility if they get it wrong and your vehicle is written off. 


This is exactly what Gap insurance protects you against.



Will I be asked to pay back the total purchase price to my contract or lease hire company?


No, your lease company will ask for the amount outstanding on your contract or lease hire agreement. This is often called an early termination or settlement amount. This difference between your motor company's market value settlement and the amount outstanding on your lease is precisely what gap insurance protects.


Am I covered if my Contract Hire vehicle is stolen?


As long as your motor insurance company agrees that the circumstances that led to your car being stolen are legitimate and is happy to offer you the market value, then yes, your gap insurance policy will jump into action.


Will my Gap Insurance policy cover named drivers?


Yes, as long as they are named on your fully comprehensive insurance policy, have a full UK licence, and are over 18. If your car insurance company agrees that you have a valid claim, your Contract Hire Gap Insurance policy will perform exactly the same as if you were driving or responsible for your vehicle when the incident happened. 


Is a Contract or lease hire Gap Insurance policy suitable for a vehicle funded with a PCP agreement?


We know that some providers offer this form of finance Gap insurance to cover PCP agreements. However, we do not think that this is the most appropriate gap policy. If something happens towards the end of your PCP, you could be walking away from thousands, if not tens of thousands of pounds, which would have been covered if you had been directed to a form of PCP gap like return-to-invoice or vehicle replacement.


Is Contract Hire gap the same as Finance gap?


Yes, it is in so much as it is just protecting a financial shortfall. However, a contract hire or lease hire policy for a nominal additional premium allows you to protect a proportion of your initial rental. This is often referred to as Deposit protection. 


Do I need Lease Hire Gap Insurance?


Yes, as you expect, we strongly advise that you protect yourself with a gap insurance policy. We could not actively offer policies if we did not believe in their importance. However, the decision ultimately rests with you, and it will depend on whether you are willing to take the risk of potentially being without a vehicle and having a settlement to pay.


Is Contract Hire gap the same as Lease Hire gap?


The answer is yes, perhaps. However, it's important to note that there are different types of lease hire. Some agreements require you to sell the vehicle at the end of the Contract, while others allow you to continue with a peppercorn rental. Understanding your agreement type and what you are liable for at the end of your Contract can help you make informed choices.


Am I covered if I am in payment arrears with my agreement?


Yes, but any arrears will be deducted from your settlement.


Whose name do you need to put your Gap Insurance policy in?


Your policy should be registered in the name of the person who has signed the finance agreement. However, it may need to be in joint policy names if the main motor insurance policy is in someone else's name.

e.g., a finance agreement in the name of Mr A, who is a named driver of Mrs A's motor insurance policy. ( they both live at the same address)

Alternatively, if the lease agreement is in the name of a company, then it should be registered to the company with a director as the main point of contact.


What is the average Contract hire gap insurance payout?


Our average gap Insurance payout is £5500, and we have a claims payout rate of 99.2%


Does my motor insurance company's "new for old cover " mean I don't need cover for the first 12 months?


We are not trained or regulated to discuss car insurance as it is not our field of expertise, and we would always ask you to talk to your motor insurance provider. However, new-for-old cover typically only applies when you buy a new car or van. As you are not purchasing the vehicle and it will not be registered in your name, this would typically not apply.


Why do many businesses fund their company vehicles using a contract or lease hire?


Contract hire is a popular choice for businesses looking to acquire vehicles without the financial burden of ownership. It allows businesses to lease vehicles for a fixed period, often with the option to include maintenance packages, and then return the vehicles at the end of the Contract without worrying about depreciation or selling them. Different accounting rules apply, so it can also be a tax-efficient way to source vehicles.


Can I cancel my lease Hire Gap Insurance?

Yes, you can cancel your policy at any time. If you cancel within the first 30 days, and you have not attempted to make a claim, you are eligible for a full refund. If you cancel after this period again on the understanding that you have not attempted to make a claim, any unused premium will be refunded ( please check your terms and conditions as the underwriter may retain the first £35 of any premium) 


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IPID for Total Loss Contract Hire Policies purchased from June 2024Total Loss IPID Contract and lease Hire Gap Insurance From June 2024                  T&Cs for Total Loss Contract Hire Policies purchased from June 2024Total Loss Contract and lease Hire Gap Insurance From June 2024

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IPID for Total Loss Contract Hire policies purchased from March 2023Total Loss IPID Contract and lease Hire Gap InsuranceFrom March 2023                 T&Cs for Total Loss Contract Hire policies purchased from March 2023Total Loss Contract and lease Hire Gap Insurance From March 2023