Confusion about Contract Hire Gap Insurance?

Do you understand how your contract hire gap insurance works?

It is easy to very quickly become confused about what contract hire gap insurance is and how it can work.

Type contract hire gap insurance into your browser and there will be lots of different explanations of how it works and what protection it can offer you all ever so slightly different.

So will examples will use outstanding rentals, some amounts of liability.

So bottom line without the jargon what is contract hire gap insurance and what will it do if your contract hire vehicle is written off?

We know that contract hire depending upon how your business is set up can be an excellent way to fund business vehicles. Low commitment, low initial deposits and even keeping the costs off balance sheet.  Your accountant will be able to advise you about this and if contract hire is the best way for you and your business but essentially you enjoy the vehicle during the best years of its life and then at the end of a set period which is normally anywhere fro two to four years you must hand the vehicle back.

So lets dispell the first contract hire gap insurance myth!

You will be getting tax brakes and other business advantages by buying your vehicle using contract hire but the flip side is that you can never take ownership and must hand it back at the end of the contract. We know that some customers are given verbal assurances that this is not the case but we can assure you that this is simply not true and will not form any part of  your contract hire deal.

OK so you have a bright shinny new vehicle on contract hire and all is well until 6 months later it is stolen. Your insurance company subsequently decided to write the vehicle off.

So lets dispel contract hire gap insurance myth no 2!

Just because your vehicle is no longer here it does not mans that your agreement is finished! Don’t  forget that your contract hire agreement payments will have been based not only on what you are paying each month but also how much your finance houses predicts that thy will be able to dispose of the vehicle at the end of the contract. This means that at any one time they will have a figure that the vehicle is worth to them.

This is where the major confusion can arise. However you want to call this figure , outstanding rentals, shortfall it makes no difference instead all it means is that you are still financially liable for the difference between your finance companies settlement to close the agreement and your own motor insurance companies valuation.

This can and often if thousand of pounds and without any form of cover the balance must be settled by you or your business.

This is exactly where contract hire gap insurance can help.

Essentially it is designed simply to cover this difference is valuations and settlements meaning that you can walk away with no further financial liability.

Yes you still have no transport and have to find another deposit to fund your next vehicle but at least with contract hire gap insurance you do not also have to fund the financial shortfall from your old vehicle.

 

 

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