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.
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.
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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.
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