Guaranteed Asset Protection (GAP) or Shortfall Insurance
In the event of your vehicle being declared a "write-off" by your insurance company because of theft or an accident, there may be a shortfall between your vehicle's market value and the value required by the leasing company to settle the outstanding lease agreement.
The shortfall could be a significant sum depending on the rate of depreciation of your vehicle and the remaining period of the lease agreement. You will be held liable for the shortfall by the leasing company, however GAP Insurance protects you by paying the leasing company this shortfall on your behalf.
Who is GAP Insurance for?
Customers using Contract Hire or Finance Lease to obtain a vehicle, where their requirement is simply to get out of the agreement without financial penalty should a valid claim be made.
GAP Insurance Example
A customer buys a BMW 3 Series Saloon for £19,228, with a deposit of £1,200 and finances the remainder; 18 months later the car is involved in an accident and is written off.
The insurance company settles £12,700, but the customer still owes the Finance Company £13,831.
The GAP Insurance cover will pay the £1,131 shortfall between the Insurance Company payout and the amount due to the finance company in settlement.