Leasing a car is an option that many drivers prefer instead buying because the monthly payments are lower and upgrading to a nicer model in a few years is much easier. Nonetheless, leasing comes with its own set of challenges, one of which is the fact that car insurance usually is more expensive. Although it may be more expensive, it still helps consumers to understand why they may pay more to insure a leased vehicle as well as the available coverage options.
Understanding Car Insurance for Leased Cars
When you lease a vehicle, you are taking responsibility for something that a company owns, so a higher level of protection is expected (e.g. comprehensive car insurance). You will need to make sure that you have enough coverage as required by the company that leased you the vehicle, in addition to meeting your state requirements. While some types of advanced insurance coverage are generally considered optional, car companies that lease vehicles typically require a certain base level of insurance. Additionally, while you may settle for the bare minimum in order to keep your costs down, this decision could come back to haunt you if you are in an accident.
Always buy collision insurance
One basic type of coverage that you’ll definitely need for a leased vehicle is collision coverage. A crash with another car is among the chief concerns of any driver, and collision insurance will pay for the damages associated with an encounter with another vehicle. It’s up to you as to how much to purchase, but most companies have a set minimum that you must agree to buy. If you have great confidence in your skills as a driver or don’t drive very often, you may choose not to buy much beyond that minimum. However, there is always some degree of risk involved in driving a leased car without extensive insurance.
Consider buying comprehensive insurance
Comprehensive coverage is a natural complement to collision coverage (for more information, read the article “comprehensive vs. collision insurance“). Comprehensive is the insurance that covers damages that derive from any other sources besides collision, such as: trees, deer, vandalism and violent weather. As with collision insurance, there will be base line amounts of coverage as well as differences in price depending on the company that you’re affiliated with. Most companies have payment plans that they can customize to fit your needs.
GAP insurance for leased cars is not mandatory, but highly recommended
Another type of insurance is GAP coverage, and this is the specific type of insurance that applies specifically to those who are leasing. The purpose of GAP car insurance coverage is to make up for the gap that may exist between how much the car is worth in terms of street value, and how much you still owe in order to fully pay it off. GAP insurance is generally optional rather than mandatory, but it is highly recommended that you purchase it, since you could be left with a substantial debt if the car you are leasing gets totaled at the wrong time.
Major accidents with leased vehicles and payment options
If you are unfortunate enough to get into a major accident, keep in mind that even if the car is destroyed, your payments will not automatically stop. You still need to be attentive to what you owe the company. If you let your responsibility slide, you will owe an even greater debt and it could affect your ability to lease a car in the future; please don’t let this happen to you. If the car you have leased sustains damage but can be repaired, pay attention to the repair work that the car receives. You need to make sure that they haven’t cut any corners, as this could cause problems for you as a driver and make the company who owns the car angry with you when you return it.
Determine your state insurance requirements
In addition to the car companies, some states have minimum requirements regarding car insurance. You should check with your local DMV (Department of Motor Vehicles) to see what those are. It’s also a good idea to compare insurance rates before making a final decision about what you want to purchase and from whom. Do your homework, and try to strike a good balance between low payments and extensive coverage. The important thing is to avoid financial catastrophe if an accident happens, especially as the owner of a leased car. To get a free car insurance quote for your leased vehicle, enter your Zip Code at the top of the page to see who is offering the best deals based on your area.