Van Gap Insurance Explained
If you’re looking to lease a van, you may be mulling over your insurance options, including whether to take out van Guaranteed Asset Protection (GAP) insurance. In this article, we’ll explain what van GAP insurance is, how it works, and whether it’s worth purchasing in addition to your standard insurance policy.
What is van GAP insurance?
Van GAP insurance provides extra coverage if your van is written off or stolen. While you still need regular van insurance, it typically only covers a van’s current market value. GAP insurance serves as an addition to your main insurance policy and bridges the difference between this payout and the original purchase price or remaining finance balance.
There are six main types of van GAP insurance policies on the market:
- Finance cover: Pays for the difference between your insurer’s settlement figure and the outstanding finance owed.
- Vehicle replacement: Settles your finances and pays for a replacement vehicle matching your previous model’s specifications, age, and mileage.
- Return to invoice: Covers the difference between your insurance payout and the invoice price paid for your vehicle.
- Return to value: Tops up the difference between the insurance provider payment and your vehicle’s value when new.
- Negative equity cover: Offers protection if the vehicle’s value falls below the amount of the loan you took out.
- Lease cover: Covers all pre-determined lease repayments, including early repayment charges and, sometimes, the deposit paid at the beginning of the contract.
Gap insurance example for leased vans
For leased vans, GAP insurance covers the difference between the van’s value at the time of your claim and the money left to pay on the leasing contract.
Suppose your van was originally worth £20,000 and is stolen or written off after a year. Due to depreciation, your insurance company might value the van at £15,000. However, you could still owe £18,000 on the lease agreement. In this scenario, your GAP insurance would cover the £3,000 shortfall.
Gap insurance example for purchased or financed vans
If you bought your van on finance, GAP insurance pays the difference between the amount your insurance pays out and what you originally paid. It also covers any remaining finance balance, whichever is higher.
For example, if you bought a van for £20,000 and it was written off with a market value of £12,000, your primary insurance would only pay £12,000. In this instance, GAP insurance would cover the remaining £8,000.
Alternatively, if you financed the van and still owe £14,000 on the loan, GAP insurance would cover the £2,000 shortfall between the insurance payout and the remaining loan balance.
Van GAP insurance exclusions
There are certain situations where GAP insurance will not provide coverage. Common exclusions include:
- If your van is repairable or recovered
- If you broke the law during an accident
- If a non-named driver was behind the wheel during an accident
- If your van is over a certain age or mileage
- If your primary insurance provider deducts a sum from their payout. For example, GAP insurance won’t pay for unpaid premiums.
Additionally, GAP insurance won’t pay for non-standard modifications added after the van was purchased or leased. A modification is usually any change that significantly alters the appearance or performance of your van, such as:
- Engine modifications
- Body modifications
- Suspension modifications
- Brake modifications
- Seat changes
- Window tinting
- Paint jobs
Like all insurers, a van GAP policy might not provide coverage in certain scenarios. For example, if your main insurer does not pay out, you cannot claim on GAP insurance. A provider may also refuse to pay if you used the van for undeclared commercial activities, stopped paying your premiums, or sold the van.
You can also only claim once on van GAP insurance, as a successful claim means the van is at the end of its policy — even if there is time left on the cover. The replacement vehicle will require a separate van GAP policy.
What are the benefits of van GAP insurance?
While GAP insurance isn’t a legal requirement, it offers several benefits for van drivers, including:
- Financial protection: Whether through accident or theft, van GAP insurance prevents you from being out of pocket for a vehicle you no longer have.
- Avoidance of negative equity: Vans depreciate quickly, which means your van might be worth less than what you owe on your lease. GAP insurance protects against negative equity if you take out negative equity cover.
- Peace of mind: Knowing you have protection against significant financial loss in a total loss situation means you can rest assured while on the road.
- Flexibility: Many insurance companies offer flexible coverage terms so you can get van GAP insurance tailored to fit your needs.
Is it worth getting GAP insurance on a van?
Van GAP insurance is particularly beneficial if you only paid a small deposit on a van, took out finance, or have a long lease agreement. In each case, you’ll likely owe large sums to providers if your van is declared a total loss. GAP insurance ensures you won’t be out of pocket if this happens.
On the other hand, GAP insurance might not be worth it if there is little difference between the van’s purchase price and your insurance provider’s valuation. Additionally, if your van is less than a year old and you have van replacement cover in your insurance, you may want to consider getting GAP insurance later.
What is the cost of GAP insurance for a leased van?
GAP insurance costs vary and depend on your van’s make, model, age, and value. The contract length also plays a factor and often aligns with a lease agreement.
The amount you pay will also depend on the coverage type you purchase. A vehicle replacement agreement, for example, will cost much more than a typical finance coverage policy.
Top tips for getting cheaper van GAP insurance
As you’ll be paying an additional cost on top of your regular insurance, it’s a good idea to hunt around for the best price. Here are our top tips for getting cheaper van GAP insurance:
- Shop for quotes: Check out online comparison sites for the best deal.
- Bundle with existing policies: Check if your current insurance provider offers GAP insurance to see if you qualify for discounts or lower premiums.
- Don’t be afraid to negotiate: Speak with providers to negotiate terms and pricing based on your needs and see if they can offer a better rate.
- Leverage discounts and promotions: Some insurers offer discounts if you pay your annual premium upfront. Others may provide multi-vehicle discounts, which can lead to significant savings.
- Buy early: Get your GAP insurance as soon as your lease starts, as waiting can result in higher premiums or reduced coverage options.
How long does GAP insurance last on a leased van?
Van GAP insurance is usually purchased within one year of leasing or buying a van. You can agree to a policy lasting the length of your lease agreement, often around three years. Some providers allow you to purchase GAP insurance for up to five years, depending on your needs.
If you’re considering leasing a van and want to know more about insurance options and policies, get in touch with a member of our team or check out our Synergy Total Care insurance service.
