Leasing a car offers many benefits. You often put less money down when you sign your lease, and your monthly payments are usually less than if you bought the car. Since you enter into a contractual agreement when you lease a vehicle, you’ll need to comply with its terms. Although every car needs to be insured, the requirements may be different when leasing. Keep reading to learn about car insurance when leasing.
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What is car insurance when leasing?
Car insurance provides financial protection when you are involved in a car accident or if your vehicle is stolen or damaged. You must pay for car insurance if you purchase or lease a car. However, your leasing company may have additional auto insurance requirements that must be satisfied. You may be required to carry specific insurance or have higher coverage limits.
Is car insurance mandatory when leasing a car?
Since you don’t own the vehicle, car insurance is mandatory when you lease a vehicle. Leasing companies require full insurance coverage to protect their vehicle from accidents or damage. You need to have the necessary coverage when leasing a car to avoid being stuck with a hefty bill from the leasing company if the vehicle is damaged.
What are the car insurance coverages required for leased cars?
Although auto policy requirements vary by state and lessor, here are the most common coverage options available.
1. Gap insurance
In the event of a total loss, guaranteed asset protection (GAP) pays the difference between the value of your vehicle at the time of the accident and how much you still owe on your lease. Gap coverage helps minimize loss when your car is stolen or totaled.
Gap insurance kicks in after comprehensive and collision insurance coverage. Without gap insurance, you could be stuck paying the leasing company the difference between what you owe and what the car is worth.
2. Comprehensive coverage
Comprehensive insurance covers leased vehicle damage caused by natural disasters like floods, fires, or hail. Comprehensive coverage kicks in when your vehicle is stolen or vandalized.
3. Collision coverage
Collision coverage applies when your leased vehicle is damaged while driving. Repairs fall under collision coverage if you hit another car or object while driving. However, collision coverage does not extend to other property damage you may have caused.
4. Liability coverage
With liability coverage, you are protected from damage caused by accidents that are your fault. Liability insurance covers situations where someone needs medical attention or you have damaged someone else’s vehicle or property.
5. Uninsured and underinsured motorist coverage
Uninsured motorist coverage protects you if you are hit by a driver who doesn’t have automobile insurance. Uninsured motorist coverage covers injuries and property damage sustained. An underinsured motorist insurance policy provides additional coverage if the at-fault party does not have enough insurance to fully compensate you for the damage.
Many states require drivers to carry personal injury protection (PIP), which helps pay for medical and rehabilitative costs when you are injured in a car accident.
How much does car insurance cost when leasing?
The cost of car insurance when you lease a vehicle depends on the type of coverage, insurance limits, and your deductible. Other factors can affect car insurance costs when leasing, such as:
1. Your driving record
Your driving history influences how much you’ll pay for car insurance. With a clean driving record, insurers see you as less likely to file a claim. However, if you have racked up traffic tickets and points on your license, you might pay higher car insurance premiums.
2. Type of vehicle you’re leasing
Leasing an expensive car or vehicle that typically costs more to repair could drive up your rates. Your car insurance premiums could be more costly if you drive a vehicle that’s at high risk for theft.
3. Your location
Where you live and work may affect how much you pay for car insurance. Each state has its own requirements for the type of coverage and limits you must carry. You may also have higher insurance costs if you live in an area with higher incidents of theft or vandalism. A long commute to work may also drive up your cost of insurance.
4. Coverage options you choose
How much coverage you carry affects how much you will pay for car insurance. You will face higher premiums if the leasing company requires you to carry expanded full coverage, such as gap insurance, as opposed to lesser coverage that might be required by your state. Your premiums may be higher with expanded insurance coverage options like roadside assistance and rental car reimbursement.
5. Insurance score
Many insurance companies assign a risk-based insurance score to estimate the odds that the insured will have a claim. Your credit score and premium payment history may significantly affect your insurance score. Drivers who pay premiums late or have lower credit scores are considered a higher risk for filing a claim.
The key to finding affordable car insurance coverage is to shop around and compare quotes from multiple insurance providers.
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Can you choose your own insurance provider when leasing a car?
Most leasing companies let you choose your own insurance provider. However, it is a good idea to check with the company you lease your car from before you make your choice as you might be required to get coverage through a specific provider.
What happens if you don’t have car insurance while leasing?
Car insurance is mandatory when you lease a vehicle. You may violate your lease agreement if you don’t insure the car. The leasing company may place their insurance coverage on the vehicle and charge you for it.
Tips for saving money on car insurance when leasing
It’s easy to save money on your monthly car insurance premiums.
Compare insurance quotes
Shop around for car insurance. By getting quotes from multiple insurance companies, you can compare prices and find the policy that fits your needs and budget.
Increase deductibles
Most car insurance policies require a deductible, a set out-of-pocket amount you pay when you have been in an accident or your vehicle has been damaged. By raising your deductible, you lower your insurance premiums.
Bundle insurance policies
Some companies offer multiple types of insurance, such as renter’s or homeowner’s insurance. The insurance company may give you a discount if you carry multiple policies with them.
Maintain a good credit score
Since insurance companies consider your credit history when setting your rates, maintaining a good credit score may help lower your monthly payment.
Ask for discounts
You might save money if you qualify for a discount. Many insurance companies offer discounts if your car has specific safety equipment or anti-theft devices. You may be able to lower your rates if you pay your balance in full, get good grades, or are in the military.
Get the Right Car Insurance When You Lease
Carrying the required insurance coverage is critical when you lease a car. Insurance protects you and the leasing company in the event of an accident or damage to your vehicle. Failing to carry the right insurance coverage could violate your lease agreement and cost you a lot of money along the way.
FAQ
Can I opt for lower coverage to reduce insurance costs?
If you meet the insurance requirements of your state and leasing company, you could opt for lower coverage to lower your insurance costs.
Can I transfer my existing car insurance to a leased vehicle?
Yes, you can transfer existing insurance coverage to a leased vehicle. Remember that you may need to increase your coverage if you drive an expensive car or the leasing company requires it.
What should I do if I have an accident with a leased vehicle?
You should contact your car insurance company to report the accident with your leased vehicle. Check your agreement to determine if you are required to report the accident to the leasing company and if repairs must be made at specific locations.
