Guide to Getting Insurance for a Leased Car

For the most part, the process involved in insuring a leased car does not differ much from any other experience in buying automobile insurance. The differences tend to be more involved with the differences between a purchase and a lease agreement. When you purchase a car, the type of insurance required is dictated by the lien holder and the state. The lien holder usually has a straightforward requirement that you must buy and keep full coverage insurance on the car. After that, the precise terms of the insurance are mostly in your hands.

Read the terms of the lease carefully regarding insurance requirements.

Since the leasing company still holds the title to the vehicle, they can have some liability if you have an accident. Because of this, leasing companies may require that you carry liability limits several times higher than the state legal requirements. If you fail to follow this guideline, it can void the lease and cost you big penalties for your transgression. If you are uncertain about all of the terms, discuss them with both your lease holder and your insurance agent.

You will need to carry full coverage insurance just like with a car loan.

Because the leasing company will lose the vehicle or incur the expense of repairs if you do not have it properly insured, they will require collision and comprehensive coverages. This insurance will pay for repairs after an accident and also protect the vehicle against damage from theft, vandalism, natural disasters, and other potential causes for loss. The fine print in this case may also address the maximum amount of deductible that is allowed on the insurance. Extremely high deductibles will lower the cost of the insurance, but it increases the financial loss after an accident. A high deductible may be incentive for the lessee to not repair the car or walk away from the lease.

Leases sometimes specify that you must purchase "gap" insurance.

This policy will pay the difference between the value of the car and the debt against it. This may be one of the areas that few people who lease automobiles will think about. Having this insurance will give you the resources to pay the balance of the lease and the residual value of the car if the vehicle is a total loss after an accident.

Other policy additions will be your decision.

Items like towing and road hazard are offered by most insurance companies. Also, rental car options while your car is being repaired can be added onto your policy. There are a variety of these choices. The leasing company will not usually care if you have these items or not. You will need to check your budget and desires to determine if these other options are right for you.