October 3, 2022
Car Insurance For Leased Cars

Car Insurance For Leased Cars

Leased car insurance: What you need to know

Renting an apartment is comparable to leasing a vehicle rather than purchasing one. You benefit from a cheaper down payment, many repairs are covered by your warranty, and you can purchase a new vehicle every few years. Leasing a car, however, prevents you from building equity. You won’t own the car after your lease is done, therefore you can’t sell it. You still need your own insurance for a leased vehicle even though you don’t technically own it. Additionally, it’s important to keep in mind a few factors that are unique to auto insurance for leased vehicles. Explore now.

Table of contents:

  1. What coverage do you need?
  2. Is gap insurance mandatory?
  3. Is insurance more expensive for a leased vehicle?
  4. What to do after your lease ends
  5. Ways to save on leased car insurance

Requirements for insuring a leased car

You should maintain adequate insurance coverage during the term of your lease since you must return your rented vehicle in the same condition that you acquired it. The following are typical choices for insurance protection for a rented car:

  • Bodily Injury Insurance
  • Property Damage Insurance
  • Uninsured and Underinsured Motorist Coverage
  • Personal Injury Protection (PIP)/Medical Payments Coverage

Due to the fact that having simply liability insurance would provide no physical protection in the event of an accident where you were at fault, you may also require the following coverages in addition to the ones listed above:

  • Comprehensive and Collision Insurance
  • Gap Coverage

Is gap insurance required for leased vehicles?

Vehicles that are financed or leased may occasionally need gap insurance. Gap insurance pays the difference between what is still left on the lease and the market value of the vehicle after depreciation. The difference between what is owed on the lease and what the insurance company pays out on a claim in the event that a leased vehicle is totaled would be the driver’s responsibility.

There are a few things to think about with gap insurance. Check first with your lease company to see if this coverage is necessary. Gap Waiver Provisions are included in some lease agreements. In the event of a significant claim, this waives the difference between the amount owed on the lease and the sum paid out by the insurance provider.

Gap insurance is not offered by all insurance companies. For instance, GEICO does not currently provide gap insurance.

Gap insurance can be obtained from an insurance company or the dealer you leased your vehicle from. It’s always worthwhile to compare costs because the dealership’s coverage can be a little more expensive.

Is insurance more expensive for a leased vehicle?

Simply put, no. Although numerous factors affect your insurance rate, they are not all related to whether the car is financed or leased. However, if you’re used to merely carrying the state-mandated minimum, it can end up costing more because your lease agreement stipulates that you must maintain full coverage insurance for your automobile.

What to do with auto insurance after a lease ends

After your lease ends, what to do with insurance is actually pretty straightforward.

  • If you’re extending the lease: keep your insurance coverage
  • If you’re trading in the vehicle for a new one: update your insurance with new vehicle information
  • If you’re buying the vehicle: remove the leasing company from the insurance and update your coverage and policy, if necessary
  • Walking away: if you’re going car-free, just cancel your insurance (and maybe invest in non-owners insurance)

Buying your leased car

There are many reasons you’d want to buy your leased car after your term is over. These might include:

  • Financing the leased vehicle is a lower monthly payment than another lease agreement
  • You’ve damaged the vehicle and are worried about the penalties
  • You’ve surpassed the mileage restrictions and are worried about the penalties
  • You like the vehicle and want to avoid another shopping/leasing experience

Whatever your motivation, buying your car out of the lease will be a straightforward process. Wait until your lease is over before requesting a few valuations for the car. The purchase of your vehicle before the lease is up may incur additional charges. 90 days prior to the end of your lease, your leasing company will likely get in touch with you to discuss the next steps. To receive the greatest deal, make sure to ask about incentives and discounts.

The only actions you need to take in terms of auto insurance are to review your coverage (and determine whether you need gap insurance) and remove your leasing agency from your policy. You must add a lienholder as an additional interest to your policy if you plan to finance your previously leased vehicle.

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