What insurance do you need when leasing a car?

Leasing an automobile is equivalent to renting a car for an extended period. You’ll usually have to pay a down payment and monthly payments, which gives you access to a vehicle for several years. You’ll return the car after the lease has expired, and you will have to decide if you want to begin a new lease or purchase the vehicle. 

But, what about insurance for a leased car? Insurance for a leased vehicle is just as important as insurance for a car you purchase. We’ll go over more in-depth details about lease car insurance requirements below.

Do you need insurance when leasing a car?

Leasing a car may require you to have more car insurance coverage than buying one outright. Among other things, leasing companies may ask that you have GAP insurance. However, many people do not need this kind of insurance if they buy a car on their own.

Most states require that car insurance for leased cars include liability insurance. Plus, some leasing companies will also require you to carry comprehensive and collision coverages, commonly known as full coverage insurance. GAP insurance, while it is not required by the state, may also be required by the leasing company.

Do leased cars come with insurance?

Your leasing agreement does not include liability, comprehensive, or collision car insurance coverage, so you will have to purchase adequate coverage to meet the requirements of both your state and your lessor. 

It is possible that your lease car insurance requirements with the dealership include GAP insurance. You can review your lease agreement to be sure. There are two options for GAP coverage:

• You can purchase the coverage through your lease agreement.
• You can get loan/lease GAP coverage from a standard insurer.

Does it cost more to insure a leased car?

The amount you pay for insurance on your leased automobile will depend on several factors, including the requirements of your leasing company, your state, and the car you’re leasing. Most leasing companies require larger coverage limits. Your lessor may also require you to carry a pre-determined deductible for comprehensive and collision coverage, which will affect your insurance rate.

Insuring a leased vehicle might be more expensive than insuring a purchased one. However, leasing a vehicle may result in lower monthly payments than financing, so the costs could balance out for you. 

Even if your lessor has stringent insurance coverage requirements, there are ways you can lower your auto insurance bill. Here are a few money-saving suggestions:

• Comparison shopping. Comparison shopping will help determine which insurance company offers the most savings through discounts and programs.
• Policy bundling. Many insurers will apply a discount if you combine your auto policy with your homeowners or renters insurance.

Ask an insurance representative if you are eligible for other car insurance discounts. Remember to comparison shop to find affordable car insurance for leased vehicles.

How are auto claims handled for leased cars?

The claims process for an automobile accident is essentially the same for both owned and leased vehicles. An insurance adjuster will inspect your vehicle for damage after you file a claim. Your insurance company may declare the leased car totaled depending on the amount of the damage.

If your car is totaled, the insurance company will pay the lessor the vehicle’s value. GAP coverage will pay the leasing company the difference between the value of the vehicle and how much you still owe if the car is totaled.

Finding the Best Rates for Car Leasing Insurance

Car leasing with insurance can be costly because most leasing companies require you to obtain liability, comprehensive, collision, and GAP auto insurance coverage, also know as full coverage insurance. However, by doing some insurance comparison shopping, you may be able to lower your insurance prices down to a manageable level.

Case Study 1: Liability Insurance

John decides to lease a new car for personal use. The leasing company requires him to have liability insurance to protect against damages or injuries caused to others in an accident. John purchases the necessary liability coverage, which includes bodily injury liability and property damage liability.

A few months into the lease, John is involved in an accident where he rear-ends another vehicle, causing significant damage to the other car and injuring the driver. Thanks to his liability insurance, John’s insurance company covers the repair costs for the damaged vehicle and the medical expenses of the injured driver, up to the policy limits.

Case Study 2: Comprehensive and Collision Insurance

Sarah leases a luxury SUV for her business. The leasing company mandates comprehensive and collision insurance coverage. One day, while parked at a client’s location, Sarah’s car is vandalized, resulting in extensive damage to the exterior. The comprehensive insurance she obtained as part of her lease car insurance covers the repairs, saving her from paying out of pocket.

In another instance, Sarah accidentally rear-ends another vehicle while driving, causing damage to both cars. Her collision insurance steps in and covers the cost of repairing her leased vehicle as well as the other driver’s car.

Case Study 3: GAP Insurance

Michael leases a brand-new sports car and opts for GAP insurance, which is required by the leasing company. A year into the lease, Michael gets into a severe accident, and his leased car is deemed a total loss. While the insurance company assesses the car’s value, they determine that the amount owed on the lease is higher than the vehicle’s worth.

However, thanks to the GAP insurance he purchased, the leasing company receives the difference between the car’s value and the outstanding lease amount, relieving Michael of the financial burden.