Have an Auto Lease or Loan? You Could Pay More for Car Insurance

Unless you like fines, jail time, and suspended driving privileges, you probably need auto insurance to legally get behind the wheel in the U.S. Each state varies in what they require, but generally, this includes bodily injury and property damage liability coverage. These protect other drivers if the policyholder causes an accident.

That's usually all drivers are legally required to have. But those who have leases or loans on their vehicles usually need to add a few more things to their policies. Here's what you need to know.

Lenders have an investment to protect

Drivers with a lease or loan are usually required to purchase collision and comprehensive coverage as part of their lease or loan agreement. This ensures that the lender or lessor gets their money back, even if the driver totals the car in an accident.

Collision coverage pays for the policyholder's vehicle repairs if they cause an accident with another vehicle. It also pays for damages due to single-car accidents.

Comprehensive coverage is broader, covering everything from severe weather damage to theft and vandalism. It also helps drivers fix their vehicles following animal-vehicle collisions. This is especially helpful for drivers who live in rural areas where deer frequently run across the highways.

Mandating that drivers add these protections to their policies gives lenders and lessors some peace of mind that they won't lose their investments. But it also increases auto insurance premiums for their drivers. How much depends on the vehicle's make and model. Newer, more expensive cars typically have higher collision and comprehensive costs because these vehicles are more costly to repair.

How to find a great deal on collision and comprehensive coverage

Though not required for drivers who own their vehicle outright, collision and comprehensive coverage are still options for them. And they're often great investments for those who can afford it. Otherwise, drivers will have to pay for their vehicle repairs out of their own pocket following an accident.

Finding the best deal on collision and comprehensive coverage is similar to finding the best minimum coverage. Shopping around is the wisest thing drivers can do. Compare quotes from several companies to see which charges the lowest rate.

Raising the policy's deductible can also reduce premium costs. However, this will result in larger out-of-pocket expenses when filing a claim. Drivers who go this route may want to keep money to cover the deductible in an emergency fund where they can access it whenever they need to.

Those who can't find a policy that fits into their budget may have to rethink the vehicle they plan to lease or buy. A more affordable model may bring lower collision and comprehensive costs, and thus, a cheaper policy. Exploring all options before making a decision is the best way for drivers to find a vehicle and an auto insurance policy that works best for them.