Insurance When Leasing A Car

Insurance When Leasing A Car: Everything You Need to Know

Leasing a car is a popular option for many people, especially those who want to drive a new car every few years without the cost of ownership. However, when leasing a car, it’s important to understand the insurance requirements and how they differ from traditional car ownership. In this article, we’ll cover everything you need to know about insurance when leasing a car.

What is Car Leasing?

Car leasing is a type of financing where you pay to drive a vehicle for a set period of time, usually two to four years. You do not own the car, but rather you are renting it from the dealer or leasing company. When the lease term ends, you return the vehicle to the dealer and can choose to lease another car or purchase one outright.

Why is Car Insurance Required when Leasing a Car?

Car insurance is required when leasing a car because the lender or leasing company wants to protect their investment. If you were to get into an accident and the car was totaled, the insurance payout would go to the leasing company, not to you. Additionally, the leasing company may require certain levels of insurance coverage to ensure that their investment is protected in the event of an accident.

What Types of Car Insurance are Required when Leasing a Car?

When leasing a car, you will generally be required to carry both comprehensive and collision insurance. These types of insurance cover damages to the car in the event of an accident, theft, or vandalism. You may also be required to carry liability insurance, which covers damages you may cause to other people or their property in an accident.

The specific insurance requirements may vary depending on the leasing company and the state you live in. It’s important to check with your leasing company to ensure that you have the appropriate types and levels of coverage.

How Much Insurance Coverage is Required when Leasing a Car?

The amount of insurance coverage required when leasing a car may vary depending on the leasing company and the state you live in. However, in general, you will be required to carry liability insurance with at least $100,000 per person and $300,000 per accident in bodily injury coverage, as well as $50,000 in property damage coverage.

You may also be required to carry comprehensive and collision insurance with a deductible of $500 to $1,000. However, some leasing companies may require a lower or higher deductible, so it’s important to check with your leasing company to determine the specific requirements.

Can You Use Your Own Car Insurance when Leasing a Car?

In some cases, you may be able to use your own car insurance when leasing a car. However, it’s important to check with your insurance company to determine if they will cover a leased vehicle. Additionally, the leasing company may require that you purchase insurance through their preferred provider.

If your insurance company does not offer coverage for a leased vehicle, or if the coverage does not meet the leasing company’s requirements, you may need to purchase insurance through the dealership or leasing company.

What Happens if You don’t have Insurance when Leasing a Car?

If you do not have the required insurance coverage when leasing a car, you may be in violation of your lease agreement. This could result in penalties, fines, or even repossession of the vehicle.

Additionally, if you were to get into an accident and did not have insurance, you could be held liable for damages to the car and any injuries or damages caused to other people or their property. This could result in significant financial hardship, including lawsuits and wage garnishment.

Conclusion

When leasing a car, it’s important to understand the insurance requirements and how they differ from traditional car ownership. You will generally be required to carry comprehensive and collision insurance, as well as liability insurance with specific coverage levels.

It’s important to check with your leasing company to ensure that you have the appropriate types and levels of coverage, and to understand what will happen if you do not have insurance or if the coverage does not meet the leasing company’s requirements.

By understanding the insurance requirements when leasing a car, you can protect your investment and avoid costly penalties and financial hardships.