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What is Shortfall Contract Hire Gap Insurance?
If you are buying a car on a form of contract hire where you can never own the car at he end of the period why do you need to think about protecting your car with a form of contract hire gap insurance? After all if you can never own the car why do you need to worry about what happens if it is written off? Surely that is what your own motor insurance is for? Why sorry yes and no!
This is because under the rules and guidelines of shortfall gap insurance you can never benefit for something bad happening. As your contract hire vehicle can never be users to own it is not yours to protect. So does this mean that you can not protect yourself with a form of contract hir gap insurance? No far from it. Don't forget that you contract hire company will have based your monthly rentals not only on the payments you are making but also the amount that they think that they will be able to dispose of your vehicle for at the end of the contract. This means that if your contract hire vehicle is written off your own motor insurance company will be paying your contract hire company the market value of the vehicle at the time. But what about the payments they had based your rentals on? This is exactly where lease gap insurance can help.
This is also where is it very easy to become confused. Simply put if your contract hire vehicle is written off then your contract hire company are within their rights to ask for these payments. They may call it advanced rentals they may call it back rentals they may call it a settlement but what ever your contract hire company call it is an amount that your are liable for. Without any form of leasing gap insurance you would be left to deal with any financial shortfall and this is exactly where contract hire gap insurance can help. This is because contract hire gap insurance pays the difference between your vehicles valuation on the day it is written off and the amount that you would need to clear your financial liability. Please remember that late payments charges and arrears would not be covered.