Novated Lease Insurance in Australia: Provider Policy or Your Own, and What Gap Cover Really Does

Novated lease insurance is the comprehensive car cover your lease contract requires, plus optional extras like gap cover and lease protection. You don’t have to buy it from your leasing provider. Most large providers let you use your own insurer, and owners regularly report saving several hundred dollars a year by switching. The catch is what you might give up: provider policies often pay out the whole lease if the car is written off, and a cheap market-value policy won’t.

That trade-off is the whole decision. Get it right and you keep the savings without carrying a gap worth thousands of dollars. Get it wrong and a write-off in year one could leave you paying for a car you no longer have.

This guide covers what insurance a novated lease needs, how to switch to your own policy, how the write-off gap works, and which add-ons are worth paying for. For the basics of how a lease works, start with our EV novated leasing hub.

What novated lease insurance is compulsory?

Comprehensive car insurance is compulsory for the full term of a novated lease. The financier owns the car until the lease ends, so it requires cover that protects its asset. Everything else, including gap cover, lease protection and tyre and rim insurance, is optional.

Pepper Money’s novated finance lease terms, used by providers including Easi, show what a financier typically asks for. You must hold comprehensive cover for all risks at the car’s current market value. The financier must approve the insurer and the policy terms, acting reasonably. The policy must note the financier’s interest as owner and first loss payee, so any payout goes to them first. If you let the cover lapse, the financier can insure the car and charge you.

Smart, FleetPartners and SG Fleet all state the same rule on their own pages: comprehensive cover at all times. Compulsory third party (CTP) cover is still part of registering the car in each state, as it is for any car.

Can you use your own insurer on a novated lease?

Yes, with most large providers. Maxxia’s FAQ says you don’t have to use its insurance and that it will budget for your premium so it stays pre-tax. RemServ and FleetPartners let you pay your insurer and then claim the premium back from your lease account. Easi asks for a certificate of currency showing the registration or VIN and the policy owner.

Provider	Own insurer allowed?	How it works
Maxxia	Yes	Premium is budgeted and paid from pre-tax salary
RemServ	Yes	Pay the insurer, then claim it back with the policy and receipt
FleetPartners	Yes	Pay first, claim back; proof of cover before delivery and at each renewal
Easi	Yes	Certificate of currency; recommends new-for-old cover for at least 24 months
SG Fleet	Not stated on its pages	Offers a Vero policy built for its leases
Smart	Not stated on its pages	Offers a Vero policy; mentions “unless you arrange your own”

Source: provider FAQs and insurance pages, as of November 2026. Check with your provider before you cancel anything.

Why switch? Price and excess. Owners comparing quotes commonly find mainstream insurers several hundred dollars a year cheaper than the provider’s bundled policy, and some report a lower excess too. That matches a broader trend. CHOICE’s 2026 analysis of more than 16,000 quotes found an average premium for comprehensive cover of $2,440 for a new electric car, against $2,005 for a new hybrid and $1,865 for a new petrol car. EV premiums are high enough that shopping around pays. Our EV insurance cost guide explains why EVs cost more to insure.

The write-off gap: what provider policies cover that others may not

The write-off gap is the difference between an insurance payout and what you still owe on the lease, and some provider policies cover it automatically. A standard comprehensive policy pays the car’s market value. Your financier wants the lease payout figure, which includes the remaining payments and the residual. Early in a lease, that payout figure can be higher than the car is worth.

Here’s how it plays out. Say your EV is written off 14 months into a five-year lease. The insurer values it at $46,000, but your payout figure is $50,000. With a market-value policy, you owe the financier $4,000 from your own pocket. You also lose the car and start again.

SG Fleet’s Vero policy includes a full lease payout benefit: if the lease balance is greater than the market-value payout, the policy pays the difference, minus any arrears. That benefit is the main reason leasing companies warn people against switching. It is real, and it is worth something.

You can replicate it yourself, though. Three ways work:

• New-car replacement. Many mainstream insurers replace a written-off car with a new one if it is under a set age, often one or two years. Check the product disclosure statement (PDS), the document that sets out exactly what a policy covers. Also confirm your financier will accept a replacement car rather than cash, because the financier is the first loss payee.
• Agreed value set at or above the payout. Agreed value is a fixed sum you and the insurer settle on at the start of each policy year. Set it at or above your lease payout figure, and trim it as the lease runs down.
• Standalone gap cover. It pays the shortfall directly, but it is the weakest option on value (see below).

How long does the gap last? It depends on the residual and the car’s depreciation. Owners who have run the numbers often find a gap of a few thousand dollars in the first two or three years, shrinking to nothing later. A sensible approach is to keep gap protection early in the lease, then switch to a cheaper market-value policy once the car is clearly worth more than the payout. Our novated lease residual value guide shows how the payout falls over the term.

Is gap insurance worth it on a novated lease?

Standalone gap insurance is rarely worth it if your comprehensive policy already offers new-car replacement or a suitable agreed value. It has a poor record in Australia. ASIC’s 2016 review of add-on insurance sold through car dealers (Report 492) found gap policies collected $631.1 million in premiums but paid only $39.9 million in claims, about 6 cents for every dollar.

The rules have improved since. From 5 October 2021, ASIC’s deferred sales model has required a four-day wait between buying a car and being offered add-on insurance like gap cover. Moneysmart still describes add-on car insurance as usually poor value and notes that dealers often earn a 20 percent commission on it.

Novated providers sell their own versions. RemServ’s Total Loss Assist, for example, pays the shortfall between your insurance payout and the lease payout or purchase price, with a minimum benefit of $5,000 and a maximum of $60,000. Products like this can make sense if your comprehensive cover is market value only and you are early in the lease. Compare the premium with the gap you would actually face.

Lease protection insurance: what it does and doesn’t cover

Lease protection insurance pays your lease while you are out of work after an involuntary job loss. It doesn’t cover the write-off gap, and it doesn’t cover resignation. It matters because a novated lease doesn’t disappear when your job does: the novation ends, the lease reverts to you, and you keep paying from after-tax income.

Product	What it covers	Main limits
SG Fleet LeaseGuard	Involuntary unemployment, plus a carer benefit	Up to 11 months of payments, capped at $15,000 total for the lease; one-month waiting period
Smart Lease Protection	Involuntary unemployment; sickness or accident	Up to 10 months (unemployment) or 18 months (sickness or accident); $400 a month toward running costs, up to $4,000
RemServ and Oly Lease Protection	Redundancy; illness or injury; other listed events	Up to 10 months of payments; $400 a month toward running costs, up to $4,000

Sources: SG Fleet LeaseGuard PDS (dated March 2023); Smart, RemServ and Oly lease protection pages, as of November 2026. Premiums aren’t published.

The exclusions decide whether the cover is worth having. LeaseGuard excludes resignation, voluntary redundancy, misconduct, casual or seasonal work, job loss in the first 30 days and job loss during probation. RemServ and Oly exclude voluntary redundancy and any job loss you knew about when you bought the policy. Several policies also let you hand the car back after a set number of insurer payments, with the insurer covering the early termination shortfall up to the cap.

Can you get lease protection on a self-managed lease? Usually not easily. A self-managed novated lease is one where you arrange finance directly with a lender, rather than through the provider, and the provider only runs the payroll side. Owners who have tried report that provider lease protection is tied to provider finance, and the underwriters point them back to the provider. Owners who asked the big banks say they don’t offer one. If you go self-managed for a cheaper rate, an income protection policy, sometimes held inside your super, may do a similar job more broadly. Our guide to changing jobs on a novated lease covers your options if you are made redundant.

One more trap: bundled provider insurance usually ends when your novation agreement ends. FleetPartners says cover stops on the day the novation terminates, along with the fuel card. If you leave your job, arrange your own comprehensive cover before your last day so the car is never uninsured.

How novated lease insurance is taxed

Insurance is paid from your pre-tax salary as part of the running-cost budget, and on an eligible EV it attracts no fringe benefits tax (FBT). The ATO’s electric car exemption page lists registration, insurance, repairs, maintenance and electricity as part of the exempt car benefit. The car must be a zero-emissions vehicle first held after 1 July 2022 and priced under the luxury car tax threshold for fuel-efficient vehicles, which is $91,661 for 2026 to 2027.

Paying pre-tax is where much of the saving comes from. A $2,400 premium paid from pre-tax salary costs someone on the 30 percent marginal rate plus Medicare levy about $1,630 in take-home pay. That holds whether you use the provider’s insurer or your own, as long as the premium runs through the lease budget. Our novated lease calculator shows the full effect on your pay.

Watch how the premium is paid. Some providers finance the first year’s insurance into the lease, which means paying interest on it for the whole term. Paying it from the running-cost budget each year is cheaper. Our novated lease hidden costs guide lists other fees to check.

Switching to your own insurer: what to check first

Before you cancel the provider’s policy, line up the replacement and check five things in its PDS:

1. Financier noted as owner and first loss payee. Without this, the financier can refuse the policy.
2. New-car replacement or agreed value. One of these protects you from the write-off gap early in the lease.
3. Excess. A lower premium with a much higher excess may not be a saving. Owners report provider excesses that are both higher and lower than mainstream policies, so compare.
4. EV-specific cover. Check charging cables, wall chargers and battery damage are covered.
5. No gap in cover. Start the new policy before the old one ends, then send the certificate of currency to your provider.

Then ask your provider to stop budgeting for its policy and to start reimbursing or paying yours. Get the cancellation of the old policy confirmed in writing, and check your next lease statement to make sure you aren’t paying for both.