You’ll generally need to have a full-coverage insurance policy and possibly gap coverage if you lease your vehicle, depending on your lease agreement.
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Updated March 6, 2024If you prefer to drive a new vehicle every few years and want to enjoy lower down payments without the hassle of car maintenance, leasing a car can be a great way to achieve the best of both worlds.
But sometimes, leasing a car can be more expensive than buying since leasing companies typically require more auto insurance coverage — like full-coverage and gap insurance — to protect their investment. The coverage requirements depend on your leasing agreement.
We’ll cover what you need to know about leased car insurance and how to find the best auto coverage for your leased vehicle.
Key Takeaways:
All drivers must have auto insurance to drive legally — including people with leased vehicles. If you lease your car, your state and leasing company dictate insurance requirements. In other words, you’ll need to purchase your state’s minimum requirements and meet any specific car insurance requirements from your leasing company.
We’ll start with typical state mandates for coverage.
The minimum car insurance requirements vary depending on where you live and are set by state law. Most states only require a certain amount of liability insurance, but some require additional coverages — we’ll explain the most common ones in more detail below.
For example, Oregon drivers must purchase an auto insurance policy with at least $25,000 for bodily injury liability per person (up to $50,000 total per accident), $20,000 for property damage liability, $15,000 per person for PIP coverage, and $25,000 in uninsured motorist coverage (up to $50,000 per accident). Check with your local department of motor vehicles to better understand your state’s requirements.
Next, let’s look at common leasing company requirements.
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When you lease your vehicle, the leasing company will tell you the type of insurance you need to buy. You’ll also need to add your leasing company as an “additional insured” when you buy your policy. This ensures that any claim payouts for your car will go to your leasing company since they own the vehicle.
The leasing company should go over this information with you when you sign your lease, but you can also find the details in your lease agreement.
Similar to a financed car, leasing companies require you to buy at least two types of additional coverages (also known as “full coverage” when you purchase both):
Your leasing company may also require you to purchase gap coverage, but how this works depends on the leasing company. Let’s take a closer look.
Gap coverage pays for the difference between your leased vehicle’s actual cash value (ACV) and the remaining lease balance if it’s stolen or totaled in an accident.
For example, imagine you lease a vehicle for $45,000, but the remaining lease balance is $30,000. Your insurer determines the vehicle is worth $25,000 at the time of the accident. This means gap coverage will pay the $5,000 difference between the car’s value and the remaining balance. Without gap coverage, you’d have to cover the extra $5,000 out of pocket.
Some leasing companies purchase gap insurance to cover leased vehicles and roll the extra charge into your monthly lease payments. Others may require you to purchase a separate gap policy. Review your lease agreement to see how your leasing company handles it.
Buying leased car insurance isn’t a difficult process, but there are some things you can do to save time and money:
Given that there isn’t a specific insurance policy for leased cars — and there’s no single best company for everyone — you choose from the same insurance companies as everyone else. That said, since you’ll need to purchase full-coverage car insurance and possibly gap coverage, some companies are an all around better option than others.
We found three companies best suited for drivers with leased cars because they offer affordable policies and gap insurance as well as great customer service and discounts, based on our research.
Average premium: $168 per month
Compare.com rating: 4.05 out of 5
Pros:
Cons:
Amica has a fine reputation among customers, offering superior policy packages and top-notch customer service without a high price tag.
Although it doesn’t offer a discount for using a telematics app to record your driving, you may qualify for plenty of other car-specific discounts, especially considering most leased vehicles are new models and come with the latest features.
Average premium: $215 per month
Compare.com rating: 3.8 out of 5
Pros:
Cons:
You’ll need to live in one of 12 states on the eastern side of the country to purchase an Erie policy, but if you do, count yourself lucky. Erie earns consistently high ratings in terms of customer satisfaction, claims processing, and its low volume of customer complaints.
Erie is an especially good option if you’re a family with teen drivers. It doesn’t offer many discounts, but of the ones it does, half are available to younger drivers.
Average premium: $164 per month
Compare.com rating: 3.95 out of 5
Pros:
Cons:
Liberty Mutual is the sixth-largest insurer in the U.S. It offers a variety of affordable auto policies — generally due to its many available discounts. In addition to standard bundling discounts, you may also qualify for lower rates if you’re a military member or a homeowner, for example. But as you might expect, the insurer has mixed customer service reviews.
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Insurers don’t charge higher car insurance rates if you’re leasing your car as opposed to paying off a loan or owning it outright. But you’ll likely spend more on insurance because of the higher amount of coverage your leasing company requires.
For example, the average liability-only policy costs $131 per month. On the other hand, full-coverage policies that leasing companies require typically cost much more — an average of $271 per month, according to Compare.com data.
The specific rates you pay depend on many factors — and this can vary a lot by company. It’s even possible for one company to charge higher rates for a minimum liability insurance policy than another company does for a full-coverage policy. Plus, if you need gap coverage, the cost varies based on where you purchase it — highlighting why shopping around is important.
Here are some of the things that can affect your rates:
Aside from gathering as many quotes as you can before purchasing a policy, there are many things you can do to save money. Here are a few potential options:
Looking for more information about leased car insurance? Here are answers to some common questions.
It depends on what you’re doing with your car at the end of your lease. If you’re swapping your car for a new one, you’ll need to update your insurance. If you’re purchasing the car, you’ll need to remove the leasing company from your policy.
Check your lease contract. You’ll usually need to let your leasing and insurance companies know what happened, and an assigned claims adjuster will contact you to determine the extent of the damage. If the car is totaled, your gap insurance will kick in. Otherwise, you may need to coordinate repairs with your leasing company.
No — or at least not everything you need. In addition to state-mandated insurance requirements, collision, and comprehensive coverage, you’ll typically need gap coverage. Some leasing companies include this cost in your monthly payments, while others require you to buy it separately.
It depends. Leasing is generally a better option for people who prefer upgrading to new cars every few years at the expense of not owning the vehicle. Financing a car is better if you want to build equity in the vehicle and own it outright after you pay off the loan.
Methodology
Data scientists at Compare.com analyzed more than 50 million real-time auto insurance rates from more than 75 partner insurance providers to compile the quotes and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information.
All the quotes listed in this article have been gathered from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide drivers with insight into how auto insurance companies determine their premiums.
Sources
Lindsay VanSomeren is a freelance personal finance writer living in Suquamish, WA. Her work has appeared with FICO, Credit Karma, The Balance, and more. She enjoys helping people learn how to manage their money better so they can live the life they want.
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