Featured within the Which? Report on Gap Insurance.
Protected by the Financial Services Compensation Scheme.
What happens in the event of your lease car being declared a total loss?
If you're leasing a vehicle or taking the car using a form of contract hire, why should you be concerned if the vehicle is declared a total loss? (i.e stolen and not recovered or damaged) After all if it's not your car, so surely it shouldn't be your problem? Unfortunately, this is not the case.
Essentially you have agreed to pay a fee for the vehicle over the course of the agreement. The lease/contract hire company will then know what they should be getting for the vehicle and the agreement over the course of the lease. For example, they will know that after three years they will get back let's say, £20,000 for the car. You have also agreed to pay them £250 a month for three years, which amounts to £9,000. Therefore, in total they know that for that car, they will get £29,000.
The lease/contract hire agreement for them is nothing more than a financial agreement, which at the end, when they have sold the car and you've finished paying the agreement off, they will have the £29,000 as explained in the example above.
This means that if your vehicle is declared a total loss, without any form of Gap Insurance, you are legally and financially responsible for paying any financial shortfall between the value of your vehicle on the day it was written off and the amount that you still have outstanding on your lease.
Lets take a look at the figures and show you what we mean. figures for illustration purposes only
You are now left with no car,you also have to pay the invoice for the shortfall and find another deposit/advanced rental. All this as well as having to cope with what happened. Please remember that under the terms of your finance agreement this amount is owed by you and you are legally responsible for paying it or making sure that it is cleared. Not exactly an ideal situation to be in.
You could however have protected yourself with a three year Lease Hire/Contract Hire Gap Insurance policy with Deposit Protection. The policy would've cost in the region of £119.11 inclusive of deposit protection, depending on your liability. This policy would have cleared your outstanding finance, regardless of the amount (there is no upper claim limit) and then given you back your initial rental, up to a maximum of £3,000.
Our policies are feature packed and work. However, no matter how good our policies are they can't stop your vehicle from being stolen or you being involved in an accident. A Lease Hire/Contract Hire Gap Insurance policy can make sure that at least the financial aspects are nothing to worry about.
Your policy is fully FCA regulated and backed by the Financial Services Compensation Scheme.
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