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Kailey Hagen has been writing about small businesses and finance for almost 10 years, with her work appearing on USA Today, CNN Money, Fox Business, and MSN Money. She specializes in personal and business bank accounts and software for small to medium-size businesses. She lives on what's almost a farm in northern Wisconsin with her husband and three dogs.
Many drivers know that some car insurance is mandatory in nearly all states, but insurance for leased cars has even more stringent requirements. Understanding these rules is key to avoiding problems with the lessor and to scoring a great deal on rates. Here's what drivers need to know about insuring a leased vehicle.
Drivers of all cars -- whether leased, financed, or owned -- must have at least the minimum liability coverage for their state. But leased vehicles often carry additional requirements. The lessor won't permit the driver to take the vehicle off the lot until they provide proof that they have adequate car insurance.
It's usually more expensive to insure a leased vehicle because lessors have more stringent insurance requirements. They own the vehicle, so they want to make sure their investment is adequately protected. Most require additional insurance for the vehicle itself, and some make drivers purchase more than the state minimum liability coverage.
Many financial institutions require additional protections of drivers with auto loans too, but their requirements usually aren't quite as steep.
The steps for how to get car insurance for a leased vehicle are similar to those for getting coverage for any other vehicle. First, the driver must choose their car and learn about the mandatory insurance requirements from their lessor.
Then, they compare car insurance rates from several companies to see which offers them the best deal. They can also choose to purchase additional coverage beyond the minimum if they desire.
Once they've settled on a policy they like, they pay their first premium and add the lessor as an additional insured. This ensures that the lessor can collect their money if the leased car is wrecked. Then, once the driver provides their proof of insurance to the lessor, they're free to take the vehicle home.
Drivers of leased vehicles usually must have the following insurance coverage:
In addition, some lessors require gap coverage. If a vehicle is totaled, this pays the difference between the actual value of the vehicle and the amount remaining on the lease. Some lessors may include this coverage in the driver's lease payments while others may require the driver to add it to their regular car insurance policy.
Drivers should inquire about whether their lease payments already include this so they don't pay for it twice.
There are a few ways a driver can get insurance for a leased car:
The simplest way to get coverage is to buy car insurance online. In order to do this, drivers visit the insurer's website and get a quote. They'll need some personal information and the details of any accidents or traffic violations that have happened in the last three to five years. They'll also need to know the make and model of the vehicle as well as the lessor's insurance requirements.
It's pretty easy to compare quotes from several insurers to find cheap car insurance. Once a driver has a policy quote they like, most insurers will enable them to purchase that policy directly from the website. Coverage can often begin the same day.
Not all insurers allow online quotes. In that case, the driver must speak to an agent, usually by phone, to get a quote. Independent agents work with several insurance providers and can help drivers compare quotes from multiple companies to find the best deal.
The process is similar to getting a quote online. The driver provides their insurer with all the necessary details to get a quote and then the agent gives them the price. If the driver wants to proceed with the purchase, they give the agent their payment information and the agent completes the transaction for them.
Some companies only sell insurance through captive agents. That means they only work for a single company, unlike independent insurance agents. Getting a quote from one of these companies is the same as working with an independent agent. However, drivers will have to contact other companies on their own if they wish to compare quotes.
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It's usually more expensive to insure a leased car than a financed or owned car because lessors have more stringent insurance requirements. These include all coverage required by state law as well as collision and comprehensive coverage and sometimes gap coverage.
Leasing cars doesn't increase car insurance in and of itself. However, drivers may be required to purchase higher coverage limits and additional protections, which can raise the cost of the policy.
It's up to each person to decide whether leasing a car is a good fit for them. Leasing enables them to switch vehicles whenever they like and their monthly car payments may be lower than if they financed. But the driver won't own the vehicle and they could face penalties if they exceed the lease's mileage limits.
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