What Is Lease Gap Insurance And Why Is It Important?

Chloe Murphy 6 minutes Published: 06/05/2022

Another insurance payment?! You've got to be kidding!

Don't panic - GAP insurance isn't nearly as expensive as 'regular' car insurance. We think it’s an essential and affordable add-on you need to know about if you're considering leasing a new car. 

No matter how careful (or lucky) you are, accidents happen. Lease GAP insurance makes sure they don't land you in a financial rut.

We're going to describe precisely what GAP insurance is and weigh up is gap insurance worth it

Doing some research before committing to a car lease? When you'd like to compare car leasing offers, be sure to use Lease Fetcher! We have rounded up leading personal car lease and business car lease deals from UK brokers, all in one place!

What is GAP insurance? 

GAP stands for Guaranteed Asset Protection and is usually offered when you lease a brand new car. 

If your business or personal contract hire car is stolen/wrecked during your lease period, your insurer is only going to pay you the current market value. This is always going to be less than the original cost to lease the car.  

If the car is written off by your insurer, there may be a gap between what your insurer pays you and what you still owe the lease company, who are the registered keeper of the lease car. A GAP insurance policy covers this difference.

How does GAP Insurance work?

GAP insurance offers you a safety net - if you don't have it and your car is crashed, say, after the first year of your lease, you're going to be in trouble. 

How car insurance normally works is that the insurance company will pay out the fair market value of the car at the time. This may leave a gap between what you are paid out and what you still owe the finance company. You are left with no car but you still have to make regular payments as if you still had it.

GAP insurance would cover the shortfall and pay off any outstanding finance left on your deal. This means you have no financial attachment to your late car and are free to lease another car of your choice. 

It's important to note that contract hire GAP insurance is a complement to your regular insurance. It's not a replacement for good comprehensive cover - lease car deals don’t include insurance so you need to make sure you arrange this yourself.

Do I really need it? 

There are a number of things that can land you in a terrible financial situation with leasing. If you don't have GAP insurance, you could be stuck. 

If you don't have GAP insurance, you could be stuck. It’s important not to rely on your regular motor insurance alone, as there are numerous scenarios that won’t be covered by insurance or your car lease warranty.

GAP insurance gives you financial protection in the event of:

  • Car theft - 300 cars are stolen every day in the UK. With things like keyless entry (which is easy to hack) coming into play, it's never been easier for thieves to steal your shiny new car. 
  • Fire - A fire doesn't necessarily need to happen because of an accident. If a car has a dangerous electrical problem, whether done maliciously or just a fault, then your car can easily catch on fire. 
  • Crashes - No matter how careful you might think you are, we're all susceptible to accidents on the road. You could be the best driver in the world - if someone else makes a big mistake, they can easily wreck your lease car. 

While it's not something we like to think about, having an accident or an unfortunate event happen to your car is a genuine possibility. If you have a lease car and want to avoid being at a total loss in the event of an accident, GAP insurance is worth the peace of mind. 

If you aren’t convinced yet, see our write off car lease  or stolen lease car post for more reasons why!

What’s not included with GAP insurance?

Though GAP insurance covers close to any event that results in your car being written off or stolen, there are some exceptions. 

Your cover will be void if:

  • Your accident occurred while you were under the influence of alcohol or drugs.
  • The car was stolen as a result of negligence (i.e. you left your car open with the engine running).
  • The vehicle was damaged beyond repair whilst committing illegal actions.
  • You’ve modified the lease car outwith your contract.  

How much is it? 

The cost of GAP insurance will vary greatly depending on what car model you have, its value, and how long your term is. 

You typically pay the GAP insurance as one premium payment, or as a direct debit over 10 months. Prices can start from £200, but you'll need to contact your lease provider for an exact quote.

Often, GAP insurance is offered to you directly by your leasing company/dealership. This is then added on to your monthly car finance payment, so you can keep your car leasing costs to one monthly fee. 

If your broker has allowed you to appoint a car lease guarantor, you should consider them when deciding whether to take out GAP insurance - if you can't make the payments, your guarantor will have to fork out the big bucks!

In most cases you can get a GAP insurance policy to last as long as your lease. It may vary depending on the provider, however as leases typically run from from 1-5 years, you should be able to get GAP insurance covering the same length of time. 

Are there any other types of GAP insurance? 

As well as Lease Finance GAP insurance, there’s a couple of other options: 

Return to Value GAP insurance

Aimed at people who’ve bought a pre-owned car, return to value insurance covers the difference between the value of the car when it was new and the maximum payment that your main insurer would make.

Vehicle Replacement GAP insurance 

This covers the difference between the amount that your car would cost to buy the same model of car at the time of the accident and the amount that your insurance company would pay-out if the car was written off. 

Return to Invoice GAP insurance

This type of GAP insurance pays out the difference between what you paid for your car on the initial invoice you received and how much the insurer paid you. 

You may have noticed these are all pretty similar. However, the main takeaway is that you don’t necessarily need to be leasing a car to get GAP insurance! 


Leasing a brand new car is usually less risky than buying used. You know you're the first owner, and you don't have to worry about any MOTs or incoming car lease repair costs. 

However, you're at financial risk if your lease car gets ruined. Your insurer will only pay for the value of the vehicle at that time and not the price you leased it for. You could end up in debt to the leasing company until you pay off the remainder of your finance agreement. To prevent this, take out some lease GAP insurance - it's affordable, and offers some much-needed peace of mind.

For more information on how car leasing works and what insurance you need for a lease car, why not check out our other articles?

Or if you're simply researching everything you need to know before taking out a lease deal, we're here to help when you're ready to set up a deal. We help you to compare car lease deals from the UK's leading brokers - check out personal car leasing and business car leasing deals for our top car leasing special offers!