What You Need to Know About Lease Insurance
If you lease a vehicle, you’ll need more
car insurance than if you buy a car. For instance, leasing companies may require that you carry gap insurance. This is coverage that you may not need if you purchase a car yourself.
However, most states require that leased and owned cars have liability coverage, comprehensive insurance and collision protection.
Leasing vs. Financing a Car
What Is the Difference Between Leasing and Financing a Car?
There are pros and cons to buying a car or leasing one. Deciding which one is best can be tough, especially if you’re not sure which will help you save money. The difference between the two is simple:
- Leasing a car means you’re signing an agreement to pay a monthly rate to drive the vehicle, but you’re not going to own it eventually. It’s essentially renting a car from the dealership.
- Buying a car means you’ll take out a loan and pay it off to own the automobile. You can also pay for the car in full at any time.
To help you decide if you should get a car loan or sign up for lease payments, consider the benefits and drawbacks to each:
LEASING A CAR
Benefits
- Low monthly payments
- No need to worry about depreciation
- You can easily stay in a new car
Drawbacks
- Mileage restrictions
- Fees for extra wear and tear
- Lease termination fees
BUYING A CAR
Benefits
- Gaining ownership over time
- No mileage limits
- Ability to sell it at any time
Drawbacks
- Fluctuating resale costs
- Higher monthly payments
- Maintenance costs
Is It More Expensive to Insure a Leased Car?
Although
state auto insurance requirements are the same for owned or leased vehicles, some leasing companies may want you to have higher limits for protection. These companies may also require additional coverages that go beyond what your state requires. This can make the insurance cost more for leased vehicles.
Leased Car Insurance Requirements
What Type of Insurance Do You Need For a Lease?
Most leasing companies will
require more car insurance than the state liability insurance minimums. They’ll also want you to have:
- Collision coverage, which pays for damages to your vehicle from another car or object.
- Comprehensive coverage to help protect your car from damages you can’t control like fire, hail, wind, theft, vandalism or hitting a deer.
- Gap insurance, which will protect you if your car is totaled when you owe more money on the lease or loan than the car is currently worth.
To learn more about what your state requires for liability coverage and other auto insurance coverages, you can speak with The Hartford’s representatives at
888-413-8970. They’ll make sure you understand
how much car insurance you need and that you get enough protection to cover what your car is worth.
Gap Insurance for a Leased Car
Your auto insurance helps pay for damages or replacing your vehicle based on your actual cash value (ACV).
Gap insurance coverages help pay for the difference between your car’s ACV and the amount you still owe on the loan if it’s stolen or totaled. Most leases require you to have this insurance.
Common Questions About Car Leasing and Insurance
Do You Have to Have Full Coverage to Lease a Car?
Most leasing companies require you to have full auto insurance coverage before you start driving their cars. This also follows the majority of state laws. To learn more about the policies you’ll need for
full coverage car insurance, call your insurance company. They can walk you through each policy you need, like bodily injury and property damage liability insurance.
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Is Insurance Included in a Leased Car?
Your leasing company may include gap coverage and add the cost into your monthly payments. The best way to find out if your leasing company includes auto coverage is to ask them directly. Most don’t offer essential coverages like liability insurance, so you’ll need to get these separately.
How Much More Is Insurance on a Leased Car?
The amount that you pay for insurance on your leased car will depend on a variety of factors, like your:
- Leasing company’s requirements
- State
- Car type
In general, most leasing companies have higher coverage limits. This, combined with other factors, can make leasing a vehicle more expensive than buying one.
Do Lease Cars Need Gap Insurance?
Most leasing companies want you to have gap insurance. That’s why many of them will automatically include it in your monthly payments.
Get a Quote for Lease Insurance
To learn more about the coverage you need for your leased or financed vehicle, get a
car insurance quote from the AARP
® Auto Insurance Program from The Hartford
1 today. You can also call The Hartford’s specialists at
888-413-8970.
Last Updated: September 21, 2023
Additional disclosures below.
States require bodily injury liability insurance and property damage liability insurance at certain coverage limits. So, before you buy your auto policies, you’ll want to check to see what you’ll need in your area to follow the right laws.