Do I Need Full Coverage On A Leased Car?

ANSWER: In short, the process for purchasing full coverage on a leased car is not much different from purchasing any other type of automobile insurance. Where the difference comes in is between the purchase and lease agreement. Purchasing a car means the type of insurance is dictated by the loan holder and by the state’s requirements.

Do I Need Full Coverage on a Leased Car?

When leasing a vehicle the leasing company holds the title for the vehicle and they can be somewhat liable if you have a car accident. Because of this, leasing companies try to protect themselves by requires that you carry a greater level of liability insurance than your state may require. If you do not have the required level of auto insurance, then your lease may become void and cost you big penalties for not following the lease agreement. Because of this it is important to sit down with your local independent auto insurance agent to ensure that you understand what the lease agreement requires in terms of auto insurance coverage.

The leasing company will lose the vehicle or have to pay the expense of repairs if you are not properly insured. Because of this the leasing company will require that you have full collision and comprehensive coverage. This insurance pays for repairs after an accident and also protects the vehicle against damage from vandalism, natural disasters and other potential causes for loss. The fine print of your lease agreement may also specify the maximum amount of deductible that is allowed on the insurance. Extremely high deductibles will lower the cost of the insurance, but it increases the financial loss after an accident. A high deductible may make the driver of the vehicle decide to not repair the car or walk away from the lease, something the leasing company is trying to avoid.

If you are leasing a vehicle it is also important to understand gap insurance. The leasing company may require that you have gap insurance to pay the difference between the value on the car and the debt against it. Having the insurance gives the driver the resources to pay the balance of the lease and the residual value of the car if the vehicle is a total loss after an accident. It protects you as the driver but it also protects the leasing company from the high cost if the driver backs out of a leasing agreement after an accident.

In summary, when leasing a vehicle, most leasing companies are going to require that you carry a full coverage auto insurance policy. The leasing company likes to protect itself and you in-turn have to protect yourself from high out of pocket costs in the event of an accident. When leasing a car it is important to understand the requirements of the leasing agreement. You can contact your local independent auto insurance agent to better understand the agreement and find a auto insurance policy that provides the required coverage.

Other Enhanced Insurance articles related to Car Insurance Premiums:

Does My Job Affect My Car Insurance Rates?

How Much Car Insurance Do I Need?

How Do I Buy Car Insurance?

Cancellations vs. Non-renewals

Car Insurance Discounts

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

Jim operates an insurance agent network called Insurance Partners, aggregating agents in the Midwest for over 25 years. He was National Agent of the Year for Metropolitan in 1993 and Midwest Agent of the Year for Travelers in 2011. He served as a founding board member of the Surplus Lines Association of Minnesota.

3 comments on “Do I Need Full Coverage On A Leased Car?

  1. Hi i bought my first car on a lease with only liability insurance and i have gotten into a crash the dealership helped me get the car insurance because it was my first car. I have left the dealer ship with the knowledge of having full coverage. My insurance has not changed since day 1. Eight months later i gotten into a crash and rear ended someone. I found out that day my care wont be repaired only the other driver. I called mycar insurance, my loan lender first tech federal credit union. And mazda dealership. Mazda said that if my car wasnt fully covered then first tech would charge me a penalty for not having full coverage and they would have gave me a letter in the mail explaining that they would charge me. And first tech is saying that i should have not gotten the car in the first place because it is illegal to get a car on a loan with only liability coverage i was supposed to have full. Mazda says i have a case againt first tech and first tech is saying that mazda needs to pay for my car damages. Im confused since the accident i have learned more about my insurance policies and i upgraded my coverage to full. I dont know where to go from here and i really need a car to go to work. Please help

Leave a Comment

Your email address will not be published. Required fields are marked *