Lease Auto Insurance: Does It Cover Fender Benders?

If you lease a car, you will need to take out an insurance policy that includes physical damage coverage, also known as comprehensive and collision coverage. This means that if you're involved in a fender bender, your insurance policy will cover the cost of repairs to your vehicle. However, it's important to note that insurance requirements for leased vehicles are typically stricter than for financed or owned vehicles, and as a result, insurance coverage on a leased vehicle is usually more expensive.

Collision coverage

If you're in an accident, you can file a claim with your insurance company. They will send an adjuster to assess the damage and provide an estimate for repairs. After accepting the estimate, you can have your car repaired at their preferred shop or choose your own mechanic. The insurance company will then pay for the repairs, minus your deductible, which is the amount you need to pay out of pocket.

Nearly all leasing companies require comprehensive and collision coverage for leased vehicles. This is because they want to protect their investment and ensure that the car can be returned to its pre-crash state in case of an accident. Collision coverage is typically mandatory when leasing or financing a car, and you may be required to maintain this coverage throughout the lease term.

Benefits of Collision Coverage

Cost of Collision Coverage

The cost of collision coverage varies depending on various factors, including the value of your car, your driving record, and the insurance company you choose. It is generally more expensive to insure a leased vehicle due to higher coverage requirements. However, you can shop around and compare rates from different insurers to find the best deal.

Comprehensive coverage

When leasing a car, you are responsible for insuring the vehicle and maintaining a certain amount of coverage on it. This is because the leasing company still owns the vehicle.

Liability coverage

Bodily injury liability covers medical expenses for others injured in an accident for which you are at fault. The minimum coverage per person and accident varies by state, with a common requirement being $25,000 per person and $50,000 per accident. Some leasing companies may require higher bodily injury liability limits, such as $100,000 per person and $300,000 per accident.

Property damage liability covers damage to another person's property in the event of an accident. A minimum of $10,000 per accident is typical, while some leasing companies may require a higher limit of $50,000.

In addition to liability coverage, leasing companies typically require comprehensive and collision coverage. Comprehensive coverage pays for damage to your car that is not caused by a collision, such as theft, vandalism, or natural disasters. Collision coverage, on the other hand, pays for damage to your car resulting from a collision with another vehicle or object.

It's important to note that the requirements for insurance on a leased vehicle may vary depending on the state and the leasing company. It is always a good idea to review the specific requirements of your lease agreement and the insurance laws in your state.

Gap insurance

When you buy or lease a new car, it starts to depreciate in value as soon as you drive it off the dealer's lot. Most cars lose 20% of their value within the first year. Standard auto insurance policies only cover the depreciated value of a car, which can leave a gap between what your vehicle is currently worth and the amount you still owe on it. This is where gap insurance comes into play.

For example, let's say you finance $30,000 for a new car. After a few years, you've been making all your payments, but the car's value has decreased to $20,000. However, you still owe $25,000 on your loan. If your vehicle is totaled in an accident, your standard insurance would only pay you $20,000 (minus your deductible), leaving you with a $5,000 gap. With gap insurance, this gap would be covered, ensuring you can pay off your loan in full.

While gap insurance is optional, some lenders and leasing companies may require you to purchase it. It is important to check with your insurance provider and leasing company to understand their specific requirements and determine if gap insurance is right for you.

Deductibles

An auto insurance deductible is the amount you pay "out of pocket" before your insurance covers the rest. In other words, it is the amount you must pay towards the cost of repairs before your insurance company steps in. This typically applies to collision, comprehensive, uninsured motorist, and personal injury protection coverages.

When it comes to choosing a deductible, you usually have the option of selecting a low or high deductible. A low deductible means you'll have a higher insurance rate, but you'll pay less out of pocket in the event of a claim. On the other hand, a high deductible results in a lower insurance rate but a higher out-of-pocket cost when you need to make a claim. Deductible amounts typically range from $100 to $2,000, with $500 being the most common choice.

It's important to note that deductibles apply every time you file a claim and are responsible for paying your policy's stated deductible. For example, if you have a $500 deductible and $3,000 in damage from a covered accident, your insurer will pay $2,500, and you'll be responsible for the remaining $500.

In some cases, you may not need to involve your insurance company at all. If the damage cost is close to your deductible, you may choose to pay for the repairs yourself, especially if the accident was minor and involved only you or one other driver with no injuries. Filing a claim may cause your insurance premium to increase, so it's often a better option to pay out of pocket if the damage is minimal.

Additionally, consider adding accident forgiveness to your policy, which ensures your rates won't increase after your first accident. However, this may require an additional premium, and not all accidents will qualify for accident forgiveness.

Frequently asked questions