What Insurance Coverage Do I Need If my Car Is Leased?

Leasing firms ensure that the vehicle has adequate insurance coverage as they maintain ownership, even though you’re the one driving it. Prior to granting access, they typically mandate a minimum of Collision and Comprehensive coverage, along with a good level of Liability protection. They might also request GAP coverage or incorporate it as part of the leasing expenses. Additionally, they could establish a maximum deductible threshold. Given that these auto insurance prerequisites for a leased vehicle might surpass what you would normally arrange, it could potentially lead to higher premium costs.

Leasing companies take precautions to protect their investment in the leased vehicle, and this involves ensuring proper insurance coverage. Here’s a breakdown of typical coverage requirements:

Collision Coverage may pay for the cost of repairs or replacement of the leased vehicle if it’s involved in a collision, regardless of who is at fault.

Comprehensive Coverage covers non-collision incidents, such as theft, vandalism, natural disasters, and more.

Liability Coverage comes in two parts. Bodily Injury and Property Damage liability coverage pay for injuries and damages you may cause to others in an accident. Leasing companies often require a higher level of liability coverage than the minimum mandated by your state. They typically require $100,000 per person bodily injury, $300,000 for all bodily injuries and $50,000 for property damage as the minimum liability limits.

Although it is an extra condition, most experts advise people should at least have this much liability coverage and many people agree. Of course, motorists would have had the option of going for the minimum state required coverage if they owned the auto.

GAP Coverage covers the difference between the actual cash value of the leased vehicle and the remaining balance on the lease if the vehicle is totaled or stolen. This helps prevent you from owing money to the leasing company if the insurance payout doesn’t cover the full remaining lease balance. This is a coverage vehicle owners wouldn’t normally buy. But if you shop around, you can find fairly cheap Gap coverage. Some leasing companies may not require the lessee to buy this coverage because they already arranged it and added the cost to the lease payments.

Deductibles: Leasing companies might set upper limits on deductibles, which is the amount you need to pay out of pocket in a claim. This is to ensure that you can afford the initial costs in case of an incident. Often lease contracts limit the deductibles at $1,000 maximum. This may not be necessarily a harsh condition for most people since average policies come with around $500 deductibles and most people don’t increase them higher than $1,000 anyway.

Furthermore, it’s essential to include the leasing company as an additional insured and loss payee on your insurance policy. This arrangement signifies that while you are the one covering the insurance costs, any claim payments for vehicle damage would be directed to the leasing company, the legal owner of the car. Also being additional insured, leasing companies would have liability coverage in case they are sued by third parties as the owner of the vehicle. They would also be notified by the insurer if the policy is to be canceled for things like non-payment.

Lessees might pay higher premiums due to the insurance requirements associated with leased vehicles. Nevertheless, it’s important to bear in mind that they typically get to drive a new car, and a large majority of owners with new or fairly new automobiles would opt to include physical damages coverage on their auto insurance, given the substantial investment they’ve made. Collision and Comprehensive coverage are usually the most expensive parts of a policy.

Ultimately, lessees would need to check with the lessors as to the exact insurance requirements they need to follow or read their lease contract for details.

Motorists still get all the discounts they qualify for and can shop around to find the lowest insurance quotes for a vehicle they leased. Often what really makes a difference to the cost of premiums is finding the most competitive car insurer because every provider has their own premium calculation methods and charging structure.