Not all motor insurers who offer new-for-old cover in the first year of "ownership" will permit that cover for a vehicle which is the subject of a Contract Hire Agreement. The key is that most expect you to be the Registered Keeper of the vehicle which, is something that can only be evidenced by way of the V5 Registration Document. If it's a Contract/Lease
Hire Agreement your name will never appear on the V5 Registration Document - in fact you'll probably never see the V5 document as it will remain with the finance company.
If you have a motor insurer telling you to indicate something false on the application process in order to get something that you wouldn't otherwise be entitled to according to the policy wordings (e.g. saying that you are the registered keeper when you're not), I'd be asking for a copy of that call recording immediately (and/or for the same instruction to be given to me in writing) to ensure that I have it to hand for any future claim that might arise.
Separately though, not all Contract Hire Agreements require GAP insurance...
I wrote off a leased Volvo V40 in December 2014. The shortfall between what my motor insurance paid out and what Volvo Car Finance stated was my settlement figure was something like £3,800 but the terms of my lease agreement (which was ultimately with LEX) was such that I was allowed to walk away without having to pay any of it. The downside though is that I wasn't able to get any of my initial rental back (which a GAP insurance policy with Initial Payment Cover would have covered). Still... it could have been worse.
Generally speaking... If your
leased vehicle is written off, your motor insurer will declare what they think your vehicle was worth at the time of incident (this being the amount that they'll be paying to the finance company). Separately, the finance company will calculate the settlement figure of the lease agreement which will normally be a combination of:
- What they think your car was worth, plus
- The sum of the rentals that you would have had to pay for the rest of the agreement had the car not been written off, plus
- Any arrears, excess mileage and maintenance charges (note almost all GAP insurance policies will NOT cover these fees), plus
- Often some sort of administration fee for wrapping up the agreement, less
- Sometimes but not always, there'll be a discount for settling early.
The figure paid out by your motor insurer will then either be higher or lower than the figure arrived at by the finance company.
If it's lower, this shortfall is what most people would expect to be liable for (or which a GAP insurance policy would cover - albeit excluding excess mileage fees, arrears and maintenance) however, whilst some finance companies would have you liable for
ALL of such shortfall, some would only have you liable for
SOME of the shortfall whilst others (as I personally experienced) would not hold you liable for any of it.
Thus... it's prudent to check the terms of your lease agreement specifically to see if you're likely to need GAP insurance at all.
HTH
