If you are planning to lease a car, you might be wondering how to get the best insurance coverage for your vehicle. Leasing a car is different from buying one, and it comes with some specific insurance requirements and challenges. In this article, we will explain everything you need to know about car insurance when leasing.
Insurance requirements for a leased car
When you lease a car, you are essentially renting it from the dealer or leasing company for a fixed period of time. The dealer or leasing company still owns the car, and they want to protect their investment in case of an accident or theft. Therefore, they will require you to have certain minimum levels of insurance coverage for your leased car.
The exact insurance requirements for a leased car may vary depending on the dealer or leasing company, but in general, you will need to have:
- Liability coverage: This covers the damages and injuries you cause to other people and their property in an accident. Liability coverage is mandatory in most states, but the minimum limits may not be enough for a leased car. You may need to have higher liability limits, such as $100,000 per person, $300,000 per accident, and $50,000 for property damage.
- Collision coverage: This covers the damages to your leased car in an accident, regardless of who is at fault. Collision coverage is usually optional if you own your car, but it is required for a leased car. Collision coverage typically has a deductible, which is the amount you pay out of pocket before the insurance kicks in.
- Comprehensive coverage: This covers the damages to your leased car caused by events other than collisions, such as fire, theft, vandalism, hail, or animal strikes. Comprehensive coverage is also optional if you own your car, but it is required for a leased car. Comprehensive coverage also has a deductible.
- Gap insurance: This covers the difference between the actual cash value of your leased car and the amount you owe on your lease contract in case of a total loss. Gap insurance is optional if you own your car, but it is highly recommended for a leased car. This is because the value of your leased car depreciates faster than your lease payments, creating a gap that you would have to pay out of pocket if your car is totaled. Some dealers or leasing companies may include gap insurance in your lease contract, but others may charge you extra for it.
Is it more expensive to insure a leased car?
The answer to this question depends on several factors, such as the type and value of the car, your driving record, your credit score, your location, and the insurance company you choose. However, in general, it is more expensive to insure a leased car than a purchased car.
This is because:
- You have to meet the higher insurance requirements set by the dealer or leasing company.
- You have less control over the deductibles and coverage options for your leased car.
- You may have to pay extra for gap insurance if it is not included in your lease contract.
- You may face higher premiums or fees if you drive more miles than allowed by your lease contract or if you damage the car beyond normal wear and tear.
According to ValuePenguin, the average cost of insuring a leased car in 2020 was $1,849 per year, compared to $1,427 per year for insuring a purchased car. That is a difference of $422 per year or $35 per month.
How to get insurance for a leased car
Getting insurance for a leased car is similar to getting insurance for a purchased car, but with some additional steps and considerations. Here are some tips on how to get insurance for a leased car:
- Shop around: Compare quotes from different insurance companies and see which one offers the best coverage and price for your leased car. You can use online tools like Bing’s [car insurance comparison tool] to find and compare quotes from multiple providers in minutes.
- Check the lease contract: Read the lease contract carefully and make sure you understand the insurance requirements and terms set by the dealer or leasing company. If you have any questions or doubts, ask them before signing the contract.
- Choose the right coverage: Make sure you have enough liability, collision, and comprehensive coverage to meet the minimum requirements for your leased car. You may also want to consider adding gap insurance if it is not included in your lease contract or if you are leasing an expensive or new car that depreciates quickly.
- Choose the right deductible: A deductible is the amount you pay out of pocket before the insurance pays for the damages. A higher deductible means lower premiums, but also more risk. A lower deductible means higher premiums, but also more protection. Choose a deductible that fits your budget and risk tolerance.
- Provide proof of insurance: Once you have chosen an insurance company and policy for your leased car, you will need to provide proof of insurance to the dealer or leasing company. This can be done by showing them your insurance card, declaration page, or binder. You will also need to list the dealer or leasing company as an additional insured or loss payee on your policy, which means they have the right to receive payments from the insurance company in case of a claim.
Car Insurance Providers Recommendations
There are many car insurance providers in the market, but not all of them are suitable for leasing a car. Some factors to consider when choosing a car insurance provider for a leased car are:
- Reputation and customer service: You want to choose a reliable and reputable insurance company that has good ratings and reviews from customers and experts. You also want to choose a company that has responsive and helpful customer service, especially in case of a claim or dispute.
- Coverage and price: You want to choose a company that offers the coverage you need for your leased car at a reasonable price. You also want to check if the company offers any discounts or benefits for leasing a car, such as loyalty discounts, bundling discounts, or new car replacement coverage.
- Flexibility and convenience: You want to choose a company that allows you to customize your policy and adjust your coverage and deductibles as needed. You also want to choose a company that makes it easy and convenient for you to manage your policy and make payments online or through an app.
Based on these criteria, some of the best car insurance providers for leasing a car are:
- GEICO: GEICO is one of the largest and most popular car insurance companies in the US, with over 17 million policyholders. GEICO offers competitive rates and comprehensive coverage for leased cars, including gap insurance. GEICO also has excellent customer service and claims satisfaction ratings, as well as a user-friendly website and app.
- Progressive: Progressive is another leading car insurance company in the US, with over 13 million policyholders. Progressive offers affordable rates and flexible coverage options for leased cars, including gap insurance and new car replacement coverage. Progressive also has a unique feature called Name Your Price Tool, which allows you to set your budget and see what coverage you can get for it.
- State Farm: State Farm is the largest car insurance company in the US, with over 40 million policyholders. State Farm offers competitive rates and extensive coverage for leased cars, including gap insurance and new car replacement coverage. State Farm also has a network of local agents who can provide personalized service and advice.
Leasing a car can be a smart and convenient way to drive a new or expensive car without paying the full price. However, leasing a car also comes with some specific insurance requirements and challenges that you need to be aware of. By following the tips and recommendations in this article, you can get the best insurance coverage for your leased car and enjoy your ride without worries.