Whenever you lease a vehicle, there are minimum car lease insurance requirements you must satisfy before hitting the road. Luckily, the best auto insurance companies make it easy to meet the basic standards needed for car lease insurance.
After thoroughly reviewing industry leaders, we’ve determined the top car lease insurance providers across the country. We’ll explain minimum car insurance coverage requirements, average costs, and the process to set up car lease insurance.
In this article:
- Do I Need Car Lease Insurance?
- Car Lease Insurance Coverage Plans
- Are Leased Cars More Expensive To Insure?
- How Do I Get Car Lease Insurance?
- Recommendations For Car Lease Insurance
- Should I Lease Or Finance A Car?
- FAQ: Car Lease Insurance
Do I Need Car Lease Insurance?
When you lease a vehicle instead of buying one, you’re still required to carry the state-mandated minimum car insurance requirements. The amount of coverage varies from state to state, but you’ll pretty much always need some form of car lease insurance. Lessors often also require collision and comprehensive coverage, and in some cases you’ll need gap insurance.
The person leasing a vehicle is typically responsible for purchasing car lease insurance. If you found a car and are considering a lease, it’s worth asking your leasing company “How much car insurance do I need?”
Car Lease Insurance Coverage Plans
If you’ve decided to lease a new vehicle, you’ll need to know about your lessor’s car lease insurance requirements. Reach out to the dealership or review your leasing agreement for exact details, but expect to need the following types of coverage:
Liability Insurance Coverage
In most states, whether you’re financing a vehicle, entering a car lease agreement, or paying up front, you’ll need to purchase liability auto insurance. A liability insurance policy has different minimum coverage requirements based on where you live, but the main idea is financial protection if you cause an accident.
Here’s what you’ll receive when you buy liability coverage:
- Bodily injury liability: Covers other people’s medical expenses when you’re at fault for an accident
- Property damage liability: Covers damage to other people’s vehicles when you cause an accident
While you’re choosing the best car insurance rates for your vehicle, we recommend a car lease insurance coverage limit that exceeds what you’re willing to pay out of pocket. That way, you’ll avoid major financial surprises if you cause an accident.
Some states may also require you to pick up uninsured/underinsured motorist coverage. This type of car lease insurance would kick in if you were in a wreck with someone lacking sufficient liability coverage. Other states require personal injury protection (PIP), which pays for some of your medical bills after an accident.
Comprehensive And Collision Coverage
If you’re planning to lease a vehicle, the lessor will probably require additional insurance coverage to make sure that its car is fully protected. You’ll likely have to also get the following car lease insurance policies:
- Collision car insurance: Collision coverage pays for repairs to your vehicle when you strike another vehicle or object with your car.
- Comprehensive car insurance: This covers damage to your car for most nonmoving situations. Vandalism, theft, and damage caused by natural disasters are usually included.
When you buy required car lease insurance coverage, you’ll have to name your lessor as a loss payee. This means that the insurance company will send payments to the lessor after a total loss accident.
Gap Insurance Coverage
Along with collision insurance and comprehensive insurance, some lessors may ask you to add gap insurance. “Gap” stands for “guaranteed asset protection,” and a policyholder would use this type of car lease insurance if a vehicle with outstanding payments got totaled or stolen.
In this situation, an insurer pays out the actual cash value (ACV) of the car at the time of the claim, minus your deductible. If the value of the car isn’t enough to cover the remaining balance on the car lease, gap insurance kicks in to handle the rest of the payout.
You may be paying for gap coverage without knowing it. Dealerships usually buy master policies from insurance providers to cover car leases, according to the Insurance Information Institute (III). If you’re seeing a “gap waiver” as part of your lease payments, it's likely that the dealership already has gap insurance included in your lease.
Are Leased Cars More Expensive To Insure?
Insurance providers don’t consider whether a car is being leased when setting rates, but a lessor’s car lease insurance requirements may mean you’ll need to go beyond your state’s minimum coverage limits. For instance, the state you’re in may only require $25,000 in property damage liability, but a lessor may mandate having double that amount.
Buying full coverage auto insurance in addition to liability insurance usually means you’ll pay a higher insurance premium overall. Newer cars are also more costly to insure since they have high actual cash values during the first few years of ownership.
Another variable that can raise car lease insurance rates is the size of your deductible. A car insurance deductible is the amount you pay up front before an auto insurance policy takes over the costs resulting from a claim. Higher deductibles lead to lower premiums since more of the cost is on the policyholder.
Other factors that impact the price of car lease insurance include:
- The car’s manufacturer, model, and mileage
- Your credit score
- Your driving record
- Any previous insurance claims history
Because of the extra standards often set by lessors, it’s likely that your car lease insurance will be more expensive than for most other cars. This largely depends on the additional coverage requirements set by your lessor, though.
How Do I Get Car Lease Insurance?
Signing a car lease typically entails making a commitment to a car for two to three years. That can be a huge financial decision, especially if you return the leased vehicle once the term is up. Here are some things to keep in mind if you’re looking for the best rate on car lease insurance:
- Choose a vehicle that suits your needs.
- Get the auto insurance requirements from the leasing company in advance.
- See if gap insurance is included in your lease payments.
- Compare coverage from insurance providers and see what prices and plans work for you.
- Pick a policy and provide proof of insurance to your lessor.
By following the guidelines above, you should generally end up with reasonable car lease insurance rates.
Recommendations For Car Lease Insurance
If you’re looking for car lease insurance that best matches your needs, research providers and compare car insurance quotes. After reviewing all the major car insurance companies, we found that USAA and Geico offer competitive rates, highly rated customer service, and plenty of options to save on car lease insurance.
Geico: Best Overall
As the country’s second-largest auto insurance provider, Geico has plenty of experience in meeting customers’ needs. The company boasts both an A++ rating from AM Best for financial strength and an A+ score from the Better Business Bureau (BBB). Check out our Geico auto insurance review to learn more.
USAA: Best For Military
USAA offers auto insurance only to military members, veterans, and their families. While availability is limited to these groups, USAA is worth considering for those who are eligible because of its affordable rates and exceptional customer service. Read our USAA car insurance review to learn more.
Should I Lease Or Finance A Car?
Even though both leasing and financing include making monthly payments to get behind the wheel of a new car, there are some major differences between the two methods.
Financing a car means making a down payment and paying an auto loan off until you have full ownership of the car. Leasing a vehicle is similar to paying rent on an apartment. You agree to use the leased vehicle for a set amount of time and pay the leasing company however much your car depreciates over the time period.
While leasing a vehicle is a somewhat straightforward process, there are some upsides and downsides to pursuing this option.
|Pros of a Car Lease||Cons of a Car Lease|
|The car stays under a factory warranty, giving the driver some peace of mind||Some dealerships have limits on mileage and wear and tear|
|Monthly payments are generally lower than on an auto loan||Car depreciation is usually at least 20% in the first year, and the driver will pay for it|
|The driver isn’t responsible for selling the car once the lease expires||Breaking a lease early can lead to higher fees|
|The driver may have the option to buy the car when the lease term ends||The driver won’t build equity like they would on a car they bought|
It’s usually a better idea to finance a car than to lease one. Leasing can be a great way to get behind the wheel when you can’t afford to finance or outright purchase a vehicle, though.