What Insurance Is Needed for a Leased Car?

Understanding insurance for a leased car
Trustedchoice.com Author Icon Written by Trusted Choice
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Written by Trusted Choice

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Reviewer: Jeffrey Green Reviewed by Jeffrey Green
Reviewer: Jeffrey Green
Reviewed by Jeffrey Green

Jeff Green has held a variety of sales and management roles at life insurance companies, Wall street firms, and distribution organizations over his 40-year career.  He was previously Finra 7,24,66 registered and held life insurance licenses in multiple states. He is a graduate of Stony Brook University.

Happy face of woman in car. What Insurance is Needed for a Leased Car?

When you lease a car, you may be curious about how insurance works for your vehicle. The truth is that insuring a leased car is not much different from insuring a car that you own outright.

Just like any other vehicle, a leased car requires insurance coverage to protect you from financial loss in case of an accident, theft, or other covered events. In fact, most auto lease contracts require you to maintain certain levels of insurance coverage, such as comprehensive and collision coverage, to protect the vehicle's value.

While insurance requirements for leased cars may vary from one leasing company to another, full coverage policies are generally necessary to meet the lease agreement's insurance requirements. We’ll explore insurance for leased cars in more detail, including requirements, factors that may impact car insurance costs, and why shopping around is important to get the best car insurance quotes and rates for the coverage you need.

Leased Car Insurance Requirements

How much insurance do you need? It's important to keep in mind that insurance requirements for leased cars can vary by state. Each state has its own minimum insurance requirements that drivers must meet to legally operate a vehicle. Some states may require higher liability limits or additional coverage types, so you’ll want to check with your insurance provider and leasing company to ensure that you meet the minimum insurance requirements for your state and lease agreement.

Insurers will typically require full or comprehensive coverage for leased vehicles, similar to owned vehicles. This is because the leasing company has an interest in protecting the vehicle's value. With that in mind, comprehensive coverage can help cover damage caused by events such as theft, vandalism, or natural disasters.

The most common type of required insurance is liability coverage, which has two categories: bodily injury and property damage liability coverage.

  • Bodily injury liability coverage: This can help cover medical expenses, lost wages, and other damage if you injure someone in an accident.
  • Property damage liability coverage: This can help cover the cost of damage to someone else's property in an accident.

Remember: liability coverage is designed to protect others, not you or your leased vehicle, which is why full coverage is often recommended for leased cars.


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What Factors Affect Insurance for a Leased Car?

Several factors can impact your rates to insure a leased car, including:

  • Driving history: Your driving history is one of the most important factors in determining your insurance rates. Drivers with a history of accidents, traffic violations, or DUIs are typically considered higher risk and may pay more for insurance.
  • Vehicle type: The type of vehicle you lease can also affect your insurance costs. More expensive cars generally cost more to insure, as they may be costlier to repair or replace in case of an accident.
  • Location: Insurance rates can vary widely by state due to factors such as population density, weather, and state insurance regulations.
  • Coverage type: The type and amount of coverage you choose will also affect your insurance costs. Full coverage, including collision and comprehensive coverage, typically costs more than liability-only coverage.

Other factors that may impact your insurance premiums include your age, gender, credit score, and the length of your lease agreement. When shopping for insurance for your leased car, it's important to compare quotes from multiple insurers to find the best rates and coverage options for your specific needs. That’s where an independent insurance agent can help.

Is It More Expensive to Get Insurance for a Leased Car?

When you lease a car, you might wonder if it's more expensive to get insurance than it would be if you’d purchased the car in full before driving it off the lot. The short answer is yes, your premiums may be more expensive if you lease your vehicle. That's because leasing companies usually require higher coverage policies, like collision and comprehensive coverage, to protect the value of the leased car. And as you might expect, higher coverage means higher costs.

Leasing companies may also have other insurance requirements, like a lower deductible or specific types of coverage, such as gap insurance. That’s why you’ll want to read your lease agreement carefully to understand what insurance is required and to consider the cost of insurance when deciding whether to lease a car.

While insurance costs for leased cars might be higher, it's important to remember that insurance is a necessary expense to protect you and the car in case of an accident. To save money, you can shop around for insurance quotes and compare coverage options. An independent insurance agent can help you get started.

Frequently Asked Questions about Insurance on Leased Cars

Whether or not you need gap insurance depends on your car’s lease agreement and the requirements of your leasing company. Many leasing companies require gap insurance to protect the leased vehicle's value in case of an accident or theft. Gap insurance covers the difference between the actual cash value of the car and the remaining amount you owe on the lease, which can be significant in the event of a total loss. Even if gap insurance is not required by your leasing company, it may be a wise investment to protect yourself financially in case of an accident.

Getting a good insurance rate on a leased car is possible, even if you need to pay for additional coverage. One way to save money is by comparing quotes from different providers.

You can also check out available car insurance discounts, such as those for safe drivers or receive a break on your insurance policy by taking a defensive driving course. You can also save more money by bundling your auto insurance with your homeowners or renters policy.

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