Leasing companies make sure the vehicle is covered properly because they would still own it even though you would drive it. Before they hand over the keys, they would require at least full coverage auto insurance, which includes Liability, Collision and Comprehensive. They may also ask for GAP coverage or include it within the leasing costs. They may also set an upper limit of deductibles.
Leasing is a type of long-term rental arrangement, in which you would have access to the automobile for an agreed period of time but it would be owned by the lessor. That is why, their name would be listed on the policy as a joint insured and there would be a “loss payee clause”, which means they would be receiving any claim payments. This also means that they would be notified if the policy is to be canceled for things like non-payment.
Liability portion of full coverage vehicle insurance is legally required. However, often lessors may insist on a more comfortable level of Liability coverage like $100,000/$300,000/$50,000. That translates to a maximum $100,000 for a single injury claim, $300,000 maximum for all injuries and $50,000 for property damages. This may look like an extra condition but most experts advise people to have at least this much coverage and many people agree to it. Of course, motorists would have had the option of going for the minimum state required coverage if they owned the auto outright.
Collision coverage pays damages arising from traffic accidents. And Comprehensive coverage pays for non-collision losses like weather related damages, riots, theft, vandalism and accidental incidents. Both of them have their own deductibles.
Motorists may have to pay slightly higher premiums because of the specific insurance conditions on leases. However, we need to remember that they are getting a new car and most people would have full coverage auto insurance even if they own a new vehicle outright due to the large investments they made.
Often lease contracts limit the deductibles at $1,000 maximum. This isn’t necessarily a harsh condition since average policies come with around $500 deductibles and most people don’t increase them higher than $1,000 anyway. As mentioned above, there may be higher Liability coverage requirements but it isn’t necessarily a bad thing and most companies sell full coverage automobile insurance policies with higher liability limits as standard anyway.
Still, both of the above conditions can increase car insurance premiums more than what would be if someone owned it outright. However, the real difference comes from the way GAP coverage requirements are handled. New automobiles lose their value fast and therefore if the leased auto was totaled, the insurance payout may be short of the money that would be owed to the leasing company. Gap coverage pays for this gap in valuations.
Some lessors may require GAP insurance which can be bought through the dealer or from an insurance company. Insurers may have different names for this. For example, Progressive calls it “loan/lease payoff coverage”. Also, lessors may include this cost within the monthly lease costs under the “lease coverage” or similarly named heading.
Ultimately, lessees would need to check with the lessors as to the exact insurance requirements they need to follow or read their lease for details. Although auto insurance may be slightly more expensive due to conditions attached, companies don’t charge higher rates just because the vehicle is leased.
Motorists still get all the discounts they qualify for and can shop around to find the best leased vehicle insurance quotes. Often what really makes a difference to the cost of premiums is finding the most competitive vehicle insurer because every provider has their own premium calculation methods and charging structure.