Personal Finance Expert
Tyron Jones is a finance expert who has operated within the auto insurance business for more than 10 years. He has written many other finance related articles for a number of prominent publications.
Every car and driver need to be insured to be on the road legally. However, the insurance process is confusing and doesn’t always make sense. This is especially true when it comes to leased cars. Many people don’t understand how insurance and insurance requirements work for leased cars. That’s why we put together this article.
We’ll go over common state insurance requirements for leased cars. We’ll also explain what some leasing companies require from you in order to lease from them. Use this information to make sure you’re driving legally. Understanding your insurance requirements will also help you save money on your car insurance because you can do an apples-to-apples comparison of different policies to find the cheapest one for you.
Common State Insurance Requirements for Leased Vehicles
Insurance is mostly regulated at the state level. That means every state has its own requirements and restrictions when it comes to getting auto insurance. We won’t go over every single state law, but there are a lot of things in common across the state requirements. We’ll take a look at the most common requirements.
Bodily Injury Coverage
Bodily injury coverage protects you from liability for medical bills and benefits in case of a death. Every state has their own minimum limits for this kind of coverage, and your leasing company may have an even higher minimum limit than your state does.
Property Damage Coverage
Property damage coverage protects you from liability for damage to property, including other cars. Most states require at least $10,000 in property damage coverage – and many state require an even higher minimum limit.
Collision coverage protects you from paying for the cost of repairs or replacement for your vehicle if you’re in an accident. It is frequently a component of comprehensive coverage. However, you should always read the fine print so you know exactly what is and isn’t covered when it comes to your vehicle.
Comprehensive coverage usually refers to insurance that protects you from liability that isn’t caused by an accident. This includes things like theft, fire damage, hail damage, vandalism, falling objects, and natural disasters.
Leasing Company Insurance Requirements
Different leasing companies also have different requirements for insurance on your leased vehicle. This makes sense, as the vehicle technically still belongs to the company you’re leasing it from. Understanding and abiding by these requirements is the best way to make sure you’re honoring your lease agreement to the fullest. It also means you can be confident your insurance meets your state requirements.
Leasing companies can put requirements on nearly every aspect of insurance. Some of the more common requirements include specific liability coverage levels. Many leasing companies also require you to have comprehensive and collision insurance. This means you won’t be on the hook for the cost of repairs or replacement if your leased car is damaged in an accident where you’re at fault.
Other requirements include maximum deductibles for coverage and expanded property damage limits. Oftentimes the required limits for bodily injury and property damage go beyond what is required at the state level.
To help you better understand the situation we’ve constructed a handy chart. It covers four of the biggest leasing companies in the country. Use the chart below to gain a better understanding of the types of insurance requirements these major auto lessors have.
|Leasing Company||Additional Insurance Requirements|
Leased Cars and Gap Insurance
There’s a lot of confusion about what Gap insurance is and how it works. Gap insurance covers the difference between what you owe on a car and the value your insurance company assesses your car to be worth. For example, say you owe $15,000 on a car, but the insurance company only values your car at $10,000. Gap insurance would cover the remaining $5,000.
Gap insurance for leased cars works the same way. Some companies, lessors, or dealerships might require you to carry Gap insurance on your leased car. This shouldn’t add too much to the cost of insurance, as most Gap insurance policies are paid for up-front when you sign your lease. However, some people obtain Gap insurance through their standard auto insurance. In that case the cost of Gap insurance is rolled into your monthly bill.
Is Leasing A Car More Expensive for Insurance?
One of the biggest questions people ask is whether or not leasing a car makes insurance more expensive. The answer to that question is a solid “it depends.”
The way to tell if insurance will be more expensive for a leased car is to look at the insurance requirements that your state and potential leasing company have. You also need to consider if you’d be buying or financing a newly owned car to determine the relative cost of insurance for a leased vehicle.
If the leasing company requires substantially higher insurance limits or more insurance coverage than you’d otherwise obtain or that your state requires, then it’s extremely likely that it will be more expensive to cover a leased car. However, if the requirements are similar or the same, then insurance won’t be much more expensive.
You also need to compare insurance for a leased car to insurance for a car you buy or finance. One major requirement that exists for most financing agreements is the condition that you obtain comprehensive insurance.
Financing companies have this requirement to ensure that they get paid should something happen to your car. Comprehensive coverage covers you if you were at fault or not. It’s more expensive than liability only insurance, which you might get if you buy your car without financing. Liability coverage only covers liability from accidents where someone else is at fault. That means if you’re the cause of an accident, you might be on the hook for the cost to replace your car.
All of this means that the way to determine if insurance is more expensive for a leased car is to compare the cost to the cost of the type of insurance you’d be getting if you bought the car. If the requirements aren’t too different, then a leased car shouldn’t cost more or much more to insure. However, if the requirements are radically different, then a leased car will cost substantially more to insure.
Getting Insurance for a Leased Car
Obtaining insurance for a leased car isn’t that different from obtaining insurance for a car you own. One thing that’s important to keep in mind is that you’ll be required to maintain your insurance requirements for the entire duration of your lease. The insurance requirements will be clearly spelled out in the lease agreement. You’ll usually need to obtain the appropriate insurance before the dealership will let you drive the car off the lot.
The way to get the insurance you need for your leased car is to understand what your requirements are. Make sure you clearly explain your minimum limit requirements when you’re talking to your car insurance company. That way they can program in the appropriate insurance levels to produce an accurate price.
Don’t be afraid to use an internet price comparison tool to get an apples-to-apples comparison of different companies’ offerings. This will ensure that you get the best possible deal on your insurance for your leased car.
Using Car Subscription Services as an Alternative to Leasing
One attractive alternative to people considering leasing a car is to use a car subscription service. These services are fairly new and are offered by several major car dealers. The benefits of this arrangement are that you can get a car for a short period of time, usually one month. You can renew your subscription every month to keep the same car. The cost of insurance for this vehicle is factored into the subscription price. That means you don’t need to find insurance on your own and still have access to a car to get you where you need to be.
There’s usually a simple process for car subscription services. It often works like this:
- Sign up for your first month of service with the subscription company or dealership
- Pick your car and your options. One of the most important options to pay attention to is the number of miles you pick. Make sure to pick a number of miles that will leave you some wiggle room so you don’t pay any additional fees.
- The car will be delivered to you.
- At the end of the month you can either return the car or renew your subscription
As you can see, this process works great for people that don’t want to or can’t afford to own a car, but that need a car for longer than would be practical for a rental. It’s also a great alternative to leasing for many people.
General Leased Car Insurance Requirement Questions
This section answers the general questions people have about insurance and leased cars.
When you lease a car is insurance included?
Not usually – you’ll have to get your own insurance in addition to your lease.
Who pays insurance on a leased car?
In most cases, the person leasing the car pays for their own insurance.
Do you pay insurance when you lease a car?
Yes, in most cases you’ll be paying your own insurance when you lease a car. Related: What is the grace period for car insurance payment?
How does leasing work with car insurance?
You buy insurance for your leased car in accordance with the requirements outlined in your lease agreement.
What is the basic legal requirements for insurance when you lease a car?
That depends on what’s in your lease agreement. Most companies outline the limits your insurance needs to have.
How does insurance work with a leased car?
Insurance works with a leased car much like a purchased car, the only difference is the company you’re leasing from can put additional requirements for your insurance.
What is the best car insurance for people who lease?
Everyone has a different best insurance. An internet price comparison tool can help you find the best insurance for you.
Getting Insurance for a Leased Car
We’ll answer popular questions about obtaining insurance for a leased car in this section.
How soon must you get insurance on a leased car?
You’ll need to get insurance on your leased car before you can drive it off the lot.
Who owns a leased vehicle for insurance purposes?
The company leasing the vehicle owns the leased vehicle for insurance purposes.
How to find car insurance for a lease?
Any major car insurance company will offer insurance on a leased vehicle. Use a price comparison tool to find the best deal for you. Compare car insurance rates by zip code to see what people are paying in other locations.
Car lease what is a gap insurance?
Gap insurance covers the difference between your insurance settlement and what you owe on your lease or financing.
What paperwork for insurance to send to dealer for lease car?
It depends on the state where you live, but all will verify the coverage you’ve obtained in the paperwork they send.
What happens if you don’t have insurance on a leased car?
If you don’t have insurance on a leased car then you could be in violation of your lease, meaning you risk losing your car or being responsible for any damages.
How do you buy instant insurance for your lease car?
You buy instant insurance by contacting the insurance company you want to buy from. Most companies can get you covered in less than 15 minutes.
How many days do I have to buy insurance for lease car?
You need to have insurance for a leased car before you drive it off the lot.
How long do we have to notify insurance when leasing a new car?
You’ll need to notify your insurance company immediately if you start leasing a new car. You can always ask for 24 hour auto insurance coverage if this is a temporary need.
When leasing a car, do I have temporary insurance when driving home?
No, you don’t have any kind of temporary insurance when you lease a car. You’ll need to obtain insurance before you take it off the lot.
Types of Insurance and Leased Cars
This section covers the different types of insurance as they relate to leased cars.
How much insurance do I need for a leased car?
The amount of insurance you need for a leased car depends on your state and the requirements in your lease agreement. For example, if you had a bad driving record you may need to look into high risk car insurance companies which may determine your rates.
What kind of insurance do you need for a leased car?
Most companies require comprehensive coverage when you lease a car. You may be able to find car insurance with no money down to keep costs low.
What are the insurance requirements for a leased car?
Every company has their own requirements for insurance on a leased car. You’ll have to check with individual dealerships to find out their requirements.
When you lease a car what limits are you required to have on insurance?
That depends on the state where you live and other agreements based on the lease agreement.
What is full coverage auto insurance for a lease?
Full coverage for a lease is usually interpreted to mean comprehensive coverage, so your car is covered if you’re at fault as well as from things like fire and hail damage. Related: Why is car insurance so expensive?
How do I know if my car lease includes gap insurance?
You’ll need to check with the leasing agency or your lease agreement to see if you have gap insurance.
How to get extended insurance in leased car?
You’ll need to talk to your insurance company to see what your options are when it comes to extended insurance for a leased car.
What are insurance options when leasing a car?
You can pick from any company that will provide coverage that meets your state’s minimums and the minimum limits outlined in your lease agreement. Related: What is the cheapest car insurance for full coverage?
When is gap insurance needed in an auto lease?
Gap insurance is needed in an auto lease when you don’t want to be responsible for the difference between the insurance value of a car and the amount you owe on the lease, or when required by the lease agreement.
Cost of Insurance for Leased Cars
We’ll help you understand the cost of insurance for a leased car in this section.
How much is insurance on a leased car?
That depends on several factors, including the car, the driver, and what kind of minimum limits your agreement requires.
Is car insurance more expensive when you lease?
It can be, it depends on what kind of coverage you have or would have on a purchased car.
How much is gap insurance on a leased car?
It depends on the car and the setup of the standard insurance coverage. You’ll need to talk to a Gap insurance provider to get a quote in your case.
Is insurance higher when you lease a car?
It can be, but it isn’t always. It depends what kind of insurance you normally have versus what’s required by your lease.
How much is average insurance for a lease car?
There’s no statistics for average insurance for a leased car because the insurance changes so much based on the specific car in question.
How much is it for a 18 year old’s car insurance if I lease a car?
There’s no way to answer this without more information. It depends on the driving record, car, address, and other factors of the person driving the car.
How much does insurance go up leasing a new car?
It depends, it may not go up at all. Your current car insurance might meet the requirements outlined in your lease agreement.
How much does your insurance go up if you total a leased car?
There’s no single answer to this question. You’ll need to talk to your insurance company to get more information about how they do pricing.
Why car insurance is high for leased cars?
Car insurance for leased cars seems higher because you’re required to have more insurance than you might otherwise get. How can I get help with car insurance payments?
Which is cheaper car insurance a lease or finance?
That depends on lots of different factors, including the car and what the lease requirements are for car insurance.
How can I lower my car insurance with a leased car?
You should talk to your insurance company. You can get discounts for things like good driver, driver training, good grades, multi-car, multi-policy, and more.
When leasing a car, does insurance base rate on MSRP?
Sort of but not entirely. The rate is set based on a series of factors. How expensive the car will be to repair or replace is one of those factors. Related: Do I need insurance before i buy a used car?
Other Leased Car Insurance Requirement Questions
This section covers question that don’t fit into our other categories.
What happens if you stop a lease car insurance?
If you stop your insurance on your leased car then you’re in violation of the lease agreement and could face penalties.
How does the insurance works is a leased car gets stolen?
Most leasing companies require you to get comprehensive insurance which will cover the cost of replacing the car if it’s stolen.
How to get car insurance to pay for OEM parts for a leased car?
Most insurance companies won’t pay for OEM parts on a leased car. You can talk to your insurance company and see if you can pay for a modified policy.
When a leased car is totaled, who gets the insurance pay out?
The company that owns the leased car gets the insurance payout. Your lease agreement will cover this, so we recommend you read and understand the agreement.
How to notify insurance company after turning in car after lease?
You should call your insurance company and let them know there’s been a change in your vehicle. They’ll adjust your rates accordingly.
How do you know when to take your leased car off insurance?
You should never take your leased car off insurance, it’s usually required that you maintain comprehensive coverage for the duration of the lease.
When can I cancel insurance on a leased vehicle that is grounded?
You’ll need to call your insurance company and the leasing company to make sure you’re able to cancel your insurance without voiding your lease agreement.
What happens if you crash a leased car with no insurance?
If you don’t have insurance and crash a leased car, then you’ll owe damages to the company that is leasing the car to you. Related: Where can I find cheap car insurance liability only options?
What is own vs lease on car insurance?
Own vs Lease questions if you bought the car and it’s in your name or if you’re paying the dealership to use the car, but don’t actually own it. If you want to know how to lower car insurance for either scenario read our other article.
What happens if your leased car gets stolen with no insurance?
Your lease agreement likely requires you to have insurance, so you’ll be on the hook for the cost of replacing the car, plus any penalties you get for lack of insurance.
When a car lease is up do you have to notify insurance company?
It depends on the insurance company. You should always do so just in case to make sure you’re not paying for something you don’t need.
What happens if my insurance policy lapses and I total my leased vehicle?
If your insurance lapses and you total your leased vehicle then you’ll be responsible for the damages and will owe those damages to the company you’re leasing from.
What is my liability if I lease a car but insurance is in my child's name?
Your liability depends on multiple factors in this situation. As the driver of the car you’ll be responsible for damages and insurance claims. However, you may want to consult a lawyer for more information about your case. Related: Full coverage vs liability car insurance.