The person leasing the car, the lessee, usually pays for auto insurance on a leased car. The leasing company owns the car, but the lessee is responsible for buying and maintaining the required insurance coverage.
Types of insurance coverage you need for a leased car
Typically, most lease agreements will require collision and comprehensive coverage. These coverages help pay to repair or replace your car in the event of an accident. Collision coverage applies if your car hits or is hit by another car or stationary object, while comprehensive coverage applies to damage not related to a collision. This includes damage due to things like fire, theft, vandalism or natural disasters.
Do leased cars require “full coverage”?
Having collision and comprehensive coverage is known as having “full coverage” on a vehicle. Collision and comprehensive coverage are typically required for a leased car in addition to the state minimum requirements.
Is insurance more expensive on a leased car?
Car insurance for a leased vehicle is often more expensive because leasing companies typically require higher levels of coverage to protect their investment. Requirements such as “full coverage” and higher liability limits can increase the overall cost of insuring a leased car. Insurance cost would be the same if you bought the same coverage on a car you owned or financed.
Policy coverage: Leased vs owned
A leasing company will almost always require you to carry more coverage and sometimes higher limits for a leased car. While it’s a smart idea to carry more coverage than you think you need, you may not have the option to lower your coverage when it comes to a leased vehicle.
When you own or finance the vehicle, you can evaluate your own risk tolerance and select your coverages and limits. There will come a time when a car has depreciated so much, it may not make sense to carry collision and comprehensive coverage on it anymore. When leasing a vehicle, you will never get to this point because you return the car at the end of the lease.
Do you need gap insurance?
Due to the fact cars depreciate rapidly, lessors typically require gap insurance. This coverage pays for the difference between what your car is worth and what you still owe on it. This coverage can help free you from having to make payments on a car you can no longer drive.
Gap insurance may already be included in your lease payment, so check your lease documents for specifics. If it’s not already included, your auto insurance provider may offer it.
What happens if you don’t carry the required insurance on a leased car?
If you fail to meet the insurance requirements on your leased car, your leasing company will likely implement force-placed insurance. The cost of the force-placed insurance will likely be added to your lease payments.
On top of that, a forced-place insurance policy will only cover the value of the car – it won’t cover repairs, your injuries, or liability in the event of an accident.
In severe breaches of a lease agreement, the leasing company may even repossess the vehicle.
Need help? We’re here for you.
Phone
Online
Home insurance for Connecticut, Massachusetts, new Hampshire, New Jersey, New York and Pennsylvania
Agent
