Leasing a car typically requires comprehensive coverage to protect the vehicle. This differs from minimum state requirements for car insurance. When you lease, the leasing company requires you to have coverage beyond state minimums. This often includes collision coverage as well as higher bodily injury liability and property damage liability limits. You may also need to purchase gap insurance to cover the difference between the value of the vehicle and the remaining lease balance if it is totaled. This section will provide an overview of leased vehicle insurance requirements.
State minimum liability coverage requirements
Each state sets its own minimum liability coverage requirements for drivers. These state requirements provide basic liability protection but often do not meet the additional coverage needs for leased vehicles.
Bodily injury liability coverage pays medical expenses for others if you cause an accident. Most states require:
Minimum of $25,000 per person
Minimum of $50,000 per accident
However, some states like Alaska and Maine require up to $50,000 per person and $100,000 per accident.
Property damage liability coverage pays for damage to others' property that you cause in an accident. Most states require:
Minimum of $10,000 per accident
But some states like Hawaii and Kansas require up to $25,000 per accident.
While liability insurance is required in almost every state, the amounts vary significantly. Some states like New Hampshire and Virginia don't specify minimum liability limits.
Uninsured/underinsured motorist coverage pays your medical bills if you're hit by a driver with no or too little insurance. This coverage is required in some states like New York and North Dakota.
A few states like Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, New Jersey, New York, North Dakota, Pennsylvania, and Utah require drivers to carry personal injury protection (PIP) coverage. This pays medical expenses for you and passengers after an accident, regardless of fault.
State |
Bodily Injury Liability |
Property Damage Liability |
|---|---|---|
Alaska |
$50,000
per person/ |
$25,000 per accident |
Kansas |
$25,000
per person/ |
$25,000 per accident |
New Hampshire |
No specified minimum |
No specified minimum |
Utah |
$25,000
per person/ |
$15,000 per accident |
While state minimums provide basic liability protection, leasing companies often require more coverage when leasing a vehicle.
Additional coverages often required by leasing companies
Beyond state minimums, leasing companies typically require you to carry comprehensive and collision coverage to protect the vehicle itself. They may also require higher liability limits.
Comprehensive Coverage
Comprehensive coverage pays to repair damage to your leased vehicle that is not caused by a collision. This includes:
Theft
Vandalism
Falling objects
Fire
Flood
Hail damage
Animal collisions
Comprehensive has a deductible, often $500 to $1,000, which is the amount you pay before insurance covers repairs.
Many leasing companies require comprehensive coverage and set rules on the deductible, such as:
GM allows a maximum $1,000 deductible
Honda allows a maximum $1,000 deductible
Kia requires comprehensive but does not dictate the deductible amount
Collision Coverage
Collision coverage pays to repair damage to your leased vehicle caused by an accident. This includes:
Colliding with another car, object, or animal
Rollovers
Hitting a pothole
Like comprehensive, collision has a deductible. Leasing companies often set collision deductible rules such as:
Mercedes-Benz allows a maximum $2,500 deductible
Toyota allows a maximum $1,000 deductible
Nissan requires a minimum $500 deductible
In addition to comprehensive and collision, leasing companies may require liability limits higher than your state's minimums.
Gap insurance for leased vehicles
Gap insurance is an important optional coverage for leased cars. It covers the "gap" between what your auto insurance pays if the vehicle is totaled or stolen and what you still owe on the lease.
For example, say you have a leased vehicle worth $20,000. You get into an accident that totals the car. Your insurance company determines the actual cash value of your car is now only $15,000 due to depreciation. But you still owe $18,000 on your lease. Gap insurance would pay the $3,000 difference.
Without gap coverage, you'd be responsible for paying the $3,000 leftover balance even though you no longer have the vehicle. This is known as being "upside down" or "underwater" on your lease.
When Gap Insurance is Important
Gap insurance provides the most benefit when:
You have a new or almost new leased vehicle. New cars depreciate quickly.
You put little or no money down on the lease. This leaves more owed than the car may be worth.
You have a long lease term like 3-4 years. There's more time for the car to depreciate.
You drive high annual mileage such as 25,000+ miles per year. More miles = faster depreciation.
Gap Insurance Considerations
Gap insurance adds to the total lease cost through monthly fees or a one-time upfront cost.
You may be able to purchase gap coverage from your auto insurance company rather than the leasing company.
There are limits on the maximum gap benefit provided, often $50,000 or less.
Gap protection may be called "lease coverage" or similar by the leasing company.
You likely only need gap insurance on brand new cars or those less than 2-3 years old.
Whether gap coverage is worth it depends on your down payment, lease term, and other factors. Discuss with your leasing agent.
Factors that affect insurance costs for leased cars
Insuring a leased vehicle may cost more than insuring a car you own outright. This is because leasing companies require you to carry more than just basic state-mandated liability coverage. However, there are several factors that determine how much you'll pay.
Driver Factors
Your personal characteristics impact insurance rates regardless of whether you own or lease. These driver factors include:
Age: Young drivers under 25 pay the highest rates. Middle-aged drivers often get the lowest premiums.
Gender: Statistics show young men have more accidents. Men often pay more until around age 25.
Driving record: Speeding tickets, accidents, DUIs raise your rates significantly.
Credit history: In most states insurers check your credit. Poor credit leads to higher premiums.
Location: Urban areas like Boston and Miami have higher premiums than rural towns.
Vehicle Factors
The leased car itself also plays a role in insurance costs:
Make/model: Sports cars and luxury brands often cost more to insure. Volvos and Hondas tend to have lower premiums.
Age: Brand new vehicles cost the most to insure. Rates decrease as the car ages.
Safety features: Advanced braking and airbags can slightly lower rates.
Repair costs: Vehicles with higher parts and labor costs have pricier premiums.
Coverage Choices
Your choices about policies and limits impact what you pay:
Limits: Lower liability limits or higher deductibles reduce premiums.
Comprehensive/collision deductibles: Required on leased cars, but you can choose the amount.
Extra coverages: Adding gap, rental reimbursement, roadside assistance increases costs.
Bundling: Insure home or renters with same company for multi-policy discounts.
The best way to save is to comparison shop. Get quotes from several insurers to find the best rate.
Ways to lower insurance costs for leased vehicles
Even though insuring a leased vehicle may cost more, there are ways to reduce your premiums:
Increase deductibles: Ask if you can raise comprehensive and collision deductibles within your lease rules. For example, increasing a $500 deductible to $1,000 could save 15% or more. Just make sure you can afford the higher out-of-pocket cost if you need repairs.
Drop optional coverages: Review your policy to see if you're paying for rental reimbursement, roadside assistance, or other add-ons you may not need. Removing them can provide savings.
Maintain a good driving record: Drive safely and avoid accidents, speeding tickets, and other violations that raise rates. Take a defensive driving course for a discount.
Improve your credit: Insurers check your credit in most states. Pay bills on time, lower debt, and correct errors to boost your credit scores for lower premiums.
Ask about discounts: See if you qualify for any discounts such as multi-policy, good student, anti-theft devices, paperless billing, and more.
Bundle insurance policies: Insure your home/condo and auto with the same provider. Bundling can save up to 15% or more.
Comparison shop: Get quotes from at least 3 insurers. Compare the exact same coverage amounts to find the best deal. Online quotes and independent agents can help you shop around.
Raise liability limits: Increasing liability coverage above state minimums provides more protection for a minimal cost increase.
Lower collision/comprehensive deductibles: If deductibles exceed $1,000, ask the leasing company if you can go as low as $500 to potentially lower your premium.
Taking the time to manage your policy and improve driving habits pays off by keeping more money in your wallet. Shopping around for the best rate is one of the most effective ways to save on leased vehicle insurance.
Steps to getting insurance coverage for a leased car
Leasing a car requires proper insurance coverage from day one. Follow these steps when getting insurance for your leased vehicle:
1. Review lease requirements
Contact the leasing company to learn their specific insurance rules.
They will likely require comprehensive, collision, and liability higher than your state's minimums.
Ask about any deductible limits or other restrictions.
Inquire if gap or lease coverage insurance is required or optional.
2. Decide additional coverages
Consider your budget and risk tolerance.
Determine if you want gap, rental, roadside assistance, etc. beyond what's required.
Higher liability limits provide more protection for relatively little cost.
3. Shop auto insurance quotes
Get quotes from at least 3 insurance companies.
Provide the same coverage details to each for accurate comparisons.
National insurers like Geico, Progressive, and Allstate offer online quotes.
Local agents are another option for personalized service.
4. Select insurer and start policy
Choose the insurer with the best rate for the coverage you need.
You can often start a new policy instantly online or over the phone.
Provide the VIN of the leased vehicle and lease paperwork.
List the leasing company as an additional insured and loss payee.
5. Provide proof of insurance
Obtain insurance cards and any other proof of coverage documents.
Supply these to the leasing company immediately to avoid delays.
You cannot drive the new leased vehicle until you provide adequate proof of insurance.
Following these steps ensures you have the right insurance coverage at the best price when starting your new leased car agreement.
Car subscription services as an alternative to leasing
Car subscription services have emerged as an alternative to traditional long-term leasing. With a subscription:
You pay a monthly fee instead of a large downpayment to access a vehicle
Insurance and maintenance are included
No long-term contract - cancel anytime
Some advantages of subscriptions over leases:
Flexibility to switch vehicles frequently
Avoiding costs of insurance and maintenance
Lower monthly payments than leasing in some cases
Shorter commitment period
Major Car Subscription Services
Company |
Details |
|---|---|
Porsche Drive |
Monthly
fee includes tax, registration, insurance, maintenance |
Care by Volvo |
Covers
insurance, maintenance, roadside assistance |
Mercedes me Flexperience |
Monthly
fee covers insurance, roadside assistance, maintenance |
Lexus Complete Lease |
Monthly
payment includes insurance, maintenance, roadside assistance
|
Drawbacks to Consider
Limited vehicle selection compared to leasing
Availability limited only to certain metro areas
Mileage limits may result in overage fees
Condition requirements upon return may add out-of-pocket costs
For maximum flexibility, research subscription options when considering your next vehicle.
Frequently asked questions about leased car insurance
What insurance is required for a leased vehicle?
Leasing companies require:
Collision and comprehensive coverage to cover damage to the leased vehicle
Minimum bodily injury and property damage liability limits, often higher than state minimums
Some common required minimums are:
$100,000 bodily injury per person
$300,000 bodily injury per accident
$50,000 property damage per accident
Does a leased car need gap insurance?
Gap insurance is often recommended but not always required. It pays the difference between the value of a totaled/stolen car and the balance owed on the lease. This protects you from owing money for a vehicle you no longer have.
Who pays for repairs if a leased car is damaged?
If you have the proper collision and comprehensive coverage, the insurance company will pay for covered repairs beyond your deductible amount.
Without coverage, you would have to pay the leasing company for the repairs.
Can I get rental reimbursement with a leased vehicle?
Yes, rental reimbursement will cover transportation costs if your leased vehicle has covered repairs. It reimburses you for a rental car for a specified time, often up to 30 days.
What happens if I miss an insurance payment for my leased car?
The leasing company requires you to maintain continuous insurance on the vehicle. If you miss a payment, your policy could get cancelled putting you in violation of your lease.
How much liability insurance should I have on a leased vehicle?
Experts recommend 100/300/100 minimum limits:
$100,000 bodily injury per person
$300,000 bodily injury per accident
$100,000 property damage per accident
Higher limits provide more protection if you are sued after a major accident.
Following your leasing company’s required coverages and limits prevents issues. Shopping around helps find affordable premiums.
Conclusion
Leasing a vehicle has insurance implications beyond basic state minimum liability coverage requirements. Leasing companies outline insurance rules to protect their asset - the car. This commonly includes collision, comprehensive, and higher liability coverage. Optional gap insurance may also be prudent when leasing a new vehicle.
Although insuring a leased car can cost more, smart choices provide protection at an affordable price. Comparing insurance quotes among companies ensures you find the best available rate. Following the required coverages and limits set by your lease prevents issues down the road. With the right comprehensive insurance coverage, you can drive your leased car with peace of mind.
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