Insuring a leased vehicle
Leasing a car is an attractive alternative to car ownership for some drivers, but what about insurance for a leased car? Is it different from other types of car insurance? The answer is that you are likely to need to purchase more robust amounts of insurance for leasing a car than you might if you owned the vehicle outright. Your lessor may have car lease insurance requirements which include optional coverage such as collision and comprehensive to protect their investment in your vehicle. Bankrate’s insurance editorial team, which includes licensed agents with decades of industry experience, created this guide to help you make the best decisions when searching for insurance for your leased vehicle.
Car insurance for a leased car
The process for insuring a leased car is similar to insuring a financed vehicle. The main difference between insuring a leased vehicle and insuring a vehicle you own is that you may be required to purchase additional coverage, depending on any stipulations outlined by the company that owns your vehicle. Leasing your vehicle does not usually directly impact premiums, but some providers may consider it in setting your rate. However, if this is the case, the premium impact is usually minimal.
Lease insurance requirements differ, depending on what’s specified in your lease agreement. However, there are a few standard coverage options that lessees can expect to pay for when insuring their leased vehicle. Most lessors will likely require full coverage car insurance, which includes physical damage coverage to pay to repair or replace your vehicle. This is because state-required minimum coverage does not provide physical damage coverage, which you can choose to include or not include when you own a vehicle.
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Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
Lease car insurance requirements
Because the leasing company owns the car, it’s necessary for an auto insurance policy to financially protect against damage to the vehicle if it’s stolen or involved in an accident. Typically, leasing companies require collision coverage and comprehensive coverage. Collision coverage helps pay for repairs resulting from an accident, while comprehensive coverage provides coverage for repairs needed if the car is damaged via theft, vandalism, fallen objects or other non-accident-related events.
Liability insurance for leased vehicles is often required to cover at least $100,000 per person for bodily injury caused to others, up to $300,000 per accident, and property damage of at least $50,000. Policyholders with a lease may also consider purchasing gap insurance, which pays the difference between a newer leased vehicle’s value at the time of a theft or accident and the amount you still owe. Another consideration is rental car reimbursement coverage, which will pay part or all of the cost of a rental car while the leased vehicle is being repaired after a covered loss.
In contrast, if you have a car that you own outright, you are only required to purchase your home state’s minimum required car insurance. Almost all states have minimum requirements, and in many places, they are fairly low. If you live in Pennsylvania, for example, you are required to carry $15,000 per person and $30,000 per accident in bodily injury liability, along with $5,000 in property damage. This is far lower than what you would likely need to purchase with a leased vehicle.
It’s important to carefully review the lease terms, as some companies include gap insurance or other optional coverage types as part of the payments. If this coverage is not included, lessees may consider going with a carrier that offers gap insurance coverage through the auto policy.
What are the state requirements for insurance on a leased car?
If you lease a car, most lessors — regardless of the state — will require that you purchase car insurance beyond the state’s minimum coverage requirements to include comprehensive and collision coverage. The cost of this more robust coverage will be dependent on many factors, your ZIP code being one of them. For instance, a driver in Florida pays an average cost of $3,430 per year for full coverage, while a driver in Idaho only pays an average of $1,301.
Cost of insurance for a leased vehicle
Because you often have to purchase higher levels of coverage for leased cars, insurance may be more expensive than if you owned the car. These higher requirements are written into the terms of the lease, however, and if you do not adhere to them, your lessor may purchase coverage on your behalf, called force-placed insurance. This coverage may be more expensive than car insurance that you purchased on your own.
“Leasing a car can be more affordable since the monthly lease payments are usually lower than car loan payments, but there are some differences that drivers should be aware of,” says licensed agent and Bankrate writer Shannon Martin. “Lease agreements usually require bodily injury and property damage liability limits of $100,000 per person and $300,000 per occurrence. There may also be a cap on how high your comprehensive and collision deductible can be, required gap coverage and annual mileage restrictions — some of these differences may result in a higher auto insurance premium.”
The make and model of the leased vehicle can also affect the cost of car insurance. Before you commit to a lease, it might make sense to get an auto insurance quote first. This way, you can compare different makes and models to determine which fits your budget for both the lease and insurance payment. Here are sample rates for full coverage of some popular vehicles:
| Model | Avg. full coverage car insurance cost |
|---|---|
| BMW 330i | $2,773 |
| Chevrolet Corvette | $3,180 |
| Ford F-150 | $2,163 |
| Honda CRV | $2,117 |
| Subaru Outback | $1,819 |
Lessees should scrutinize the terms of their agreement before leasing the vehicle. The perceived savings may not always be worth it if the added cost of insurance drives monthly payments for the vehicle up significantly.
However, purchasing a vehicle requires a long-term commitment, which may not be desirable for drivers who prefer to switch vehicles more frequently and take advantage of newer models. It’s a good idea to weigh all the options carefully to determine which is best for specific situations.
How can I lower my lease insurance cost?
There are several strategies you can undertake that may help lower your insurance costs.
- When shopping for the best policy, it can pay to ask for quotes from several insurers. Every insurer uses their own methodologies to determine rates, so you are likely to receive a range of options from which you can pick the most affordable.
- Consider raising your deductible. This will probably earn you a lower rate but only do so if you would be able to manage the higher out-of-pocket payment in the event of a claim.
- Pay attention to discount opportunities. Almost all insurers offer at least a few discounts, and some may be easy to earn. You might, for example, save if you agree to receive your policy documents online rather than through postal mail or if you agree to pay your premium via a direct deposit.
- Improving your credit rating can benefit you over the long term. Insurers often reward those who have good credit with preferential rates, so paying your bills on time and keeping your credit utilization low can help you save on your policy over time.
Frequently asked questions
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The main difference between leasing and financing a vehicle is that a leasing company owns the leased vehicle, whereas drivers of financed cars technically “own” the vehicle but have purchased it with the help of a loan that needs to be repaid. Leasing is often compared to borrowing or renting since drivers only keep the vehicle for a set period of time without ownership. Lessees may have less control over how robust their insurance coverage will be, as leasing companies have a stake in the vehicle’s welfare. Typically, they will require more coverage than necessary for an owned or financed vehicle.
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This depends on your personal preference. Leasing a vehicle is usually less expensive than taking out a loan to purchase a car, and shorter lease agreements make it possible to change cars frequently, which can be a significant benefit for those who like to take advantage of the latest models. However, insurance for a leased vehicle could be higher than insurance for a financed vehicle, so the cost savings from monthly lease payment may be negated by the insurance premium.
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The need for gap coverage depends on the leasing company’s terms. Some companies include the cost of gap coverage in lease payments, so a separate gap insurance policy may not be needed. It’s important to review the terms of any lease agreement carefully to prevent paying for unnecessary coverage. If the leased vehicle does not come with gap insurance, it may be worth the cost to add it to an insurance policy since it can protect the lessee financially if the vehicle is totaled in a covered accident and the car’s value is less than what is owed on the remainder of the lease agreement.
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The best car insurance company is not always the same for everyone. Some people may only be focused on price, so the company offering coverage may not be as important. However, if you are searching for a company with excellent claims and customer satisfaction or one with strong financial ratings, for instance, it might be worth it to research the companies that meet those criteria. You can then get a quote from each carrier that meets these factors to compare rates and other variables.
Methodology
Bankrate utilizes Quadrant Information Services to analyze July 2024 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. Quoted rates are based on a single, 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
- $100,000 bodily injury liability per person
- $300,000 bodily injury liability per accident
- $50,000 property damage liability per accident
- $100,000 uninsured motorist bodily injury per person
- $300,000 uninsured motorist bodily injury per accident
- $500 collision deductible
- $500 comprehensive deductible
To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2022 Toyota Camry, commute five days a week and drive 12,000 miles annually.
Model: To determine cost by vehicle type, we evaluated our base profile with the following vehicles applied: BMW 330i, Chevrolet Corvette, Ford F-150, Honda CRV, Subaru Outback and Toyota Camry (base). For new vs used vehicles, we also included the following years in our calculations: 2016, 2017, 2018, 2019 (base) and 2020.
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