Introduction
Leasing a car comes with various financial responsibilities, including ensuring you have the right auto insurance coverage. Since leased vehicles are technically owned by the leasing company, you’ll often face stricter insurance requirements compared to financing or owning a car outright.
Understanding how to insure a leased car properly while avoiding overpaying can save you significant money without sacrificing protection. This guide will walk you through the key aspects of leased car insurance, required coverages, cost-saving strategies, and common pitfalls to avoid.
Insurance Requirements for a Leased Car
When you lease a vehicle, the leasing company (the lessor) requires you to carry a specific level of insurance to protect their investment. The standard requirements include:
1. Liability Insurance
- Covers injuries or property damage you cause to others in an accident.
- Most lease agreements require higher liability limits than state minimums, typically:
- $100,000 bodily injury per person
- $300,000 bodily injury per accident
- $50,000 property damage per accident
2. Comprehensive and Collision Coverage
- Comprehensive insurance covers theft, vandalism, natural disasters, and non-collision-related damage.
- Collision insurance covers repairs or replacement costs if your leased car is damaged in an accident.
- Leasing companies usually require both coverages with a low deductible, often capped at $500–$1,000.
3. Gap Insurance
- Covers the difference between your car’s actual cash value (ACV) and the remaining lease balance if the car is totaled or stolen.
- Some lease contracts include gap insurance, while others require you to purchase it separately.
4. Uninsured/Underinsured Motorist Coverage (UM/UIM)
- Protects you if an uninsured or underinsured driver causes an accident.
- Required in some states and often recommended by lessors.
How Much Does Insurance for a Leased Car Cost?
Insuring a leased vehicle typically costs more than insuring a purchased car due to higher coverage requirements. The average cost of full coverage insurance for a leased car is between $1,500–$2,500 per year, depending on:
- Vehicle make and model
- Your driving history
- Location and state laws
- Credit score (in some states)
- Selected deductibles and policy limits
How to Avoid Overpaying on Leased Car Insurance
While leasing a car may require you to maintain higher coverage levels, there are ways to reduce your premium costs.
1. Compare Insurance Quotes
Before finalizing your lease, shop around and compare quotes from multiple insurers to ensure you get the best rate.
2. Check If Gap Insurance Is Included
Some leasing companies automatically include gap insurance in your contract. If so, you don’t need to purchase it separately from your insurance provider.
3. Raise Your Deductibles
If allowed by the lessor, opting for a higher deductible (e.g., $1,000 instead of $500) can lower your premium. However, ensure you can afford the out-of-pocket cost if you file a claim.
4. Take Advantage of Discounts
Ask about discounts such as:
- Multi-policy bundling (auto + home insurance)
- Good driver discounts
- Low mileage discounts
- Defensive driving course discounts
- Safe vehicle feature discounts
- Military or veteran discounts
- Employer or professional organization discounts
5. Avoid Unnecessary Coverage Add-Ons
While optional coverages like roadside assistance or rental car reimbursement can be useful, assess whether they are worth the extra cost based on your needs.
6. Maintain a Good Credit Score
In states where credit affects insurance rates, maintaining a good credit score can help lower your premium.
7. Review Your Policy Annually
Insurance rates change, so review your policy each year and consider switching providers if better rates are available.
8. Consider Usage-Based Insurance
Some insurers offer usage-based insurance (UBI) programs that monitor your driving habits and adjust your premiums based on factors like mileage, speed, and braking patterns. If you are a safe driver, you could save a significant amount.
Common Mistakes to Avoid
1. Not Meeting Lease Insurance Requirements
Failing to meet the required insurance coverage can result in penalties or your lessor purchasing insurance on your behalf (force-placed insurance), which is often more expensive.
2. Overpaying for Gap Insurance
If your lease includes gap insurance, don’t pay extra for it through your insurer or dealership.
3. Choosing the Minimum Required Coverage
While minimum coverage may seem cheaper, it could leave you financially vulnerable in case of a major accident.
4. Ignoring Lease-Specific Fees
Some leasing companies impose additional fees if your insurance does not meet their specific requirements, so always read the contract carefully.
5. Not Considering Lease-End Costs
At the end of your lease, you may be responsible for excess wear and tear, which your insurance policy might not cover. Consider lease-end protection or negotiate these terms before signing your lease agreement.
6. Forgetting to Remove Gap Insurance at Lease-End
If you decide to purchase the car at the end of the lease, gap insurance is no longer necessary. Canceling it can save you money on your policy renewal.
Additional Ways to Save on Leased Car Insurance
- Bundle Insurance with Family Policies: If multiple family members have auto insurance, bundling policies can lead to significant discounts.
- Join an Affinity Group: Some insurers offer exclusive discounts for members of professional organizations, alumni groups, or credit unions.
- Increase Vehicle Security: Installing anti-theft devices, using a garage, or adding tracking systems can reduce your premiums.
- Reduce Coverage When Appropriate: If you are nearing the end of your lease and have enough savings, you might consider adjusting your deductible to balance your costs.
Final Thoughts
Insuring a leased car requires understanding and meeting your lessor’s insurance requirements while keeping costs manageable. By comparing quotes, maximizing discounts, and avoiding unnecessary add-ons, you can get the coverage you need without overpaying.
If you’re leasing a car or planning to, take the time to research and secure the best insurance deal to protect both yourself and your leased vehicle. With the right approach, you can stay fully covered while keeping your insurance costs as low as possible.
