Leasing a car can be appealing for drivers on a tight budget or for anyone who prefers driving the latest models. But if you lease a vehicle, you’re not considered its owner; the leasing company is. As such, it will decide exactly what car insurance coverage you need.
While minimum car insurance requirements apply to leased vehicles the same as with owned cars, lessors often require full coverage insurance in addition to a minimum liability policy. We’ve reviewed the best car insurance companies to identify which options have quality plans along with affordable rates for full coverage.
Why Do You Need Full Coverage on a Leased Car?
Since you usually do need full coverage insurance to lease a car, drivers often wonder why. The answer is simple: the leasing company owns your car and wants to protect its investment. After all, it won’t have to pay for as many repairs or damages out of pocket if your vehicle is protected with full coverage auto insurance.
This is the same reason that you typically need full coverage when you have an auto loan. Until the loan is paid off in full, the lender technically owns the car. By requiring full coverage, the lienholder makes sure that the car is financially covered in the case of damages.
Your Leasing Company Could Be an Exception
Always assume that your leasing company will require you to get full coverage for your new car. That being said, there’s always the chance, however rare, of an exception. If your lease agreement has no requirements, you will only need to meet your state’s minimum requirements.
In most cases, you’ll at least need minimum coverage which includes bodily injury liability insurance and property damage liability coverage. Certain states also require personal injury protection to cover medical expenses along with underinsured and uninsured motorist coverage.
What Does Full Coverage Insurance Include?
Full coverage car insurance includes liability insurance, comprehensive coverage and collision insurance. Liability coverage is required by law in nearly every state and pays to treat injuries and correct property damages to other people and their vehicles after an accident you caused.
Collision coverage instead covers damages to your own car after a collision with another vehicle or object. Comprehensive insurance covers damage to the car from other causes such as natural disasters, theft and vandalism.
Lessors May Require More Liability Coverage Than the State Minimum
Most states require drivers to carry state minimum liability coverage, but many lessors want higher liability coverage limits along with your standard lease payments. Expect lessors to require bodily injury liability insurance with limits of $100,000 per person and $300,000 per accident along with $50,000 of property damage liability insurance.
These liability limits protect the car insurance company from drivers who have bad driving records by making sure that new vehicles are adequately insured throughout the lease term. While you’ll likely face higher monthly payments for this coverage, you can lower your rates by increasing your deductible.
Expect To Also Need Gap Coverage
In addition to full coverage car insurance, it is very common to need gap insurance when working with auto leasing companies. This coverage is helpful when a leased or loaned car gets totaled because it pays the difference between what insurance covers and what is owed on the vehicle.
Gap insurance is important because early on in a lease or auto loan, you may owe more on the car than its actual cash value due to interest and depreciation. With gap coverage, the vehicle’s owner will receive the amount owed even if it exceeds the standard insurance payout.
Leased Versus Owned Cars: Which Have Higher Rates?
Generally speaking, rates for auto insurance are very similar whether you lease or buy a car. Remember that leased cars typically require more coverage than an owned car, so the rate for full coverage will likely be higher overall.
Can You Get Auto Insurance Through a Lessor?
Some dealerships and leasing companies give you the option of paying them for car insurance, though not all provide this choice. You should be wary of this option, even if it is on the table. Leasing companies typically charge motorists higher rates for the convenience that their coverage provides. You’ll also lose the flexibility to shop for cheap auto insurance premiums for your leased vehicle.
How To Get Insurance for a Leased Car
The process of getting full coverage insurance for a leased car is nearly identical to that for getting coverage on a purchased vehicle. First, select the car you want to lease and then contact your chosen auto insurance company.
The insurer will ask you to provide information about yourself and the car you plan to lease. Your leasing company should always ask you to provide proof of insurance before you’re allowed to place a down payment on your leased car and drive away in it.
Our Recommendations for Auto Insurance
Whether you plan to lease or buy a car, we suggest getting multiple auto insurance quotes from GEICO, USAA and State Farm. Free comparison tools are typically the easiest way to compare instant car insurance quotes from these and additional coverage providers.
GEICO: Best Overall
GEICO receives 9.1 stars out of 10.0 for its excellent auto insurance policies and relatively low car insurance costs. GEICO offers roadside assistance, rideshare coverage and mechanical breakdown coverage to drivers along with additional insurance options.
USAA: Best Military Provider
Our review team chose USAA as the Best Military Provider due to the company’s standout customer reviews and competitive car insurance rates. While USAA is often an excellent option for military members, their families and veterans, remember that others will not be eligible for its insurance products.
State Farm: Best Student Discounts
State Farm offers some of the Best Student Discounts that often make it cheap car insurance for under-25-year-olds. Rates for young drivers can be lowered further if State Farm insurance agents help you sign up for the Steer ClearⓇ and Drive Safe & Save™ programs.
Frequently Asked Questions
What type of car lease insurance will my leasing company require?
Most leasing companies will require you to have liability, collision and comprehensive coverage. These types of insurance will cover physical damages to your vehicle in nearly all situations.
What are the state requirements for insurance on a leased car?
State requirements for leased car insurance are identical to those for any other type of vehicle. Most states require liability coverage, while others also mandate personal injury protection (PIP) and uninsured or underinsured motorist coverage.
Does car leasing include insurance?
No, car insurance is almost never included in the cost of leasing. You will typically have to purchase a car insurance policy separately.
Who can drive a leased car?
Your lease restrictions will determine who else can drive your leased car. For most leases, your immediate family, including your spouse, can drive the vehicle. Some leasing companies will require you to contact their office for permission before you allow others to drive the car.
Methodology
The Detroit Bureau collects data from every major car insurance provider to formulate rankings of the best insurers. Our in-depth rating system takes into account market share, coverage, auto insurance rate estimates generated by Quadrant Information Services, customer satisfaction and ratings from industry experts. Each insurer is given a weighted score in four categories, as well as an overall score out of 10.0.
We recommend auto insurance companies based on these rankings, but we also encourage you to perform your own research and compare quotes to find the best coverage.
