Leasing A Vehicle: Insurance Impact

Leasing a car is a great way to drive a new vehicle without the higher payments that come with financing. However, it's important to understand the insurance implications of leasing. When you lease a car, you are required to purchase your own car insurance, which typically includes collision and comprehensive coverage. This means that any damage to the vehicle, whether from an accident or another incident such as theft or natural disasters, will be covered. In addition, leasing companies often require higher liability limits and may also mandate gap insurance, which covers the difference between the amount owed and the car's value if it is totaled. As a result, insuring a leased vehicle can be more expensive than insuring a financed or owned car due to the higher coverage requirements.

Leasing a car means you need full-coverage insurance

Leasing a car means you need to get car insurance for it. The type and amount of car insurance required varies from state to state, but the requirements for car insurance are generally the same whether you lease, finance, or own your car outright. Nearly all lessors will require comprehensive and collision coverage on a leased car, and some will require liability limits above your state's minimums.

Leasing companies will typically require you to carry physical damage coverage for your leased vehicle, commonly known as comprehensive and collision coverage. Comprehensive coverage pays for damages caused by events outside of your control, including weather, acts of nature, theft, vandalism, fire, and animal accidents. Collision coverage, on the other hand, pays for damage caused in an accident with another vehicle or an object, such as a telephone pole.

In addition to comprehensive and collision coverage, leasing companies may also require higher liability limits than what your state mandates. Liability coverage includes bodily injury liability, which covers medical expenses for others injured in an accident for which you are at fault, and property damage liability, which covers damage to another person's property in the event of an accident.

Another type of insurance that leasing companies may require is gap insurance. Gap insurance covers the difference between the amount owed on a leased vehicle and its actual value in the event of a total loss. This type of insurance is especially important for leased vehicles, as new vehicles depreciate quickly once driven off the dealer's lot.

Overall, leasing a car typically means you need to carry full-coverage insurance, which includes comprehensive, collision, and liability coverages. The cost of leasing a car insurance will depend on various factors, including the state you live in, the value of the vehicle, your driving record, and your credit score.

Comprehensive and collision coverage are required by leasing companies

When leasing a vehicle, you are required to have car insurance coverage at all times. Nearly all lessors will require comprehensive and collision coverage on a leased car. This is because leasing companies want to protect their investment, and these types of coverage will pay for repairs or replacement of the vehicle in the event of an accident or other damage.

Comprehensive coverage pays for damage to your car that is not caused by a collision. This includes events such as theft, vandalism, fire, hail, floods, falling objects, and accidents with animals. For example, if a tree branch falls on your leased car and causes damage, comprehensive coverage will pay for the repairs. Comprehensive coverage also usually includes a deductible, which is the amount that will be taken out of your claims check.

Collision coverage, on the other hand, pays for damage to your leased vehicle if it is involved in a collision with another object or vehicle. This includes both single-vehicle accidents and collisions with other cars. Collision coverage will pay to repair or replace your vehicle, up to its actual cash value, regardless of fault. Like comprehensive coverage, collision coverage also typically includes a deductible.

In addition to comprehensive and collision coverage, leasing companies may also require you to carry higher bodily injury liability limits and property damage liability coverage. Bodily injury liability covers medical expenses for others injured in an accident for which you are at fault, while property damage liability covers damage to another person's property in the event of an accident. These requirements vary from state to state, so be sure to check the specific requirements in your state.

It's important to note that leasing a vehicle can increase your insurance rates. The comprehensive and collision coverage requirements imposed by leasing companies often exceed state minimums, resulting in higher premiums. Additionally, leasing companies may restrict deductible amounts, which can also increase your rates.

Liability coverage is a legal requirement

Bodily injury liability coverage pays for the medical expenses of those injured in an accident caused by the policyholder. It may also cover lost wages and legal fees if the injured party files a lawsuit. The minimum coverage per person and accident varies by state, with a minimum of $25,000 per person and $50,000 per accident being the most common.

Property damage liability coverage pays for the damage to another person's property in the event of an accident caused by the policyholder. This includes damage to another person's vehicle, as well as other property such as fences, buildings, or telephone poles. A minimum of $10,000 per accident is typical for this type of coverage.

Failing to obtain the required liability coverage can result in legal consequences, including license suspension, fines, or even jail time for repeat offenses. Therefore, it is essential for drivers to understand the specific liability coverage requirements in their state and ensure they have adequate insurance protection.

In addition to the state requirements, leasing a vehicle may result in additional liability coverage requirements. Leasing companies often require higher liability limits than the state minimums, such as $100,000 per person and $300,000 per accident for bodily injury liability, and $50,000 for property damage liability. They may also mandate full-coverage insurance, which includes collision and comprehensive coverage, to protect their investment in the leased vehicle.

Gap insurance is often needed to cover the difference between the amount owed and the car's value

When you lease a car, you must get car insurance for it. The type and amount of car insurance required varies from state to state, but the state requirements for car insurance are the same whether you lease, finance, or own your car outright. Nearly all lessors will require comprehensive and collision coverage on a leased car, and some will require liability limits above your state's minimums.

Gap insurance is optional car insurance coverage that helps bridge the financial gap for drivers whose car loan balance is more than the value of their vehicle if it is totaled. It covers the difference between the amount owed on a car lease or loan and the amount paid out in a total loss settlement from an auto insurer. Gap insurance is useful for new vehicles whose value depreciates rapidly once they are driven off the dealership lot.

For example, say you lease a new car valued at $30,000, and you total it in an accident a week later. If your insurance company says the car is only worth $27,000, then gap insurance covers the $3,000 difference between what insurance will pay and what you owe on the vehicle. This prevents you from having to make payments for a car you don't drive anymore.

Gap insurance is often required by leasing companies as an add-on, or it may be automatically included as part of the price of your lease using the more generic term "lease coverage". Some lenders or leasing companies require gap insurance to protect them from car owners who walk away from a loan or lease if the car is totaled or stolen.

You can typically buy gap insurance from car insurance companies, banks, and credit unions. It can also be purchased from car dealerships, but this is usually much more expensive than buying it from a car insurance company.

Leasing a car may result in higher insurance premiums

Leasing companies own the vehicle outright, so they have stricter insurance requirements than lenders. They also require collision coverage, which isn't always necessary for financed vehicles. Leasing companies may also require a low deductible, which can increase your premium.

In addition, leasing companies may require higher liability coverage limits for bodily injury and property damage than what you might choose for yourself. They may also require gap insurance, which covers the difference between the amount owed on a leased vehicle and its actual value if it is totaled. While gap insurance is optional for financed vehicles, it is often required for leased vehicles.

The cost of insuring a leased vehicle will depend on several factors, including the state in which you live and the requirements set forth by the leasing company. It's important to note that every state has its own minimum car insurance requirements, and leased cars often require additional coverage beyond these minimums.

Overall, if you typically only insure your car to your state's minimum requirements, you will likely pay more for insurance on a leased vehicle. However, if you usually opt for full coverage, your monthly premium may not change significantly when insuring a leased car.

Frequently asked questions