Do I Need Insurance When Leasing a Vehicle ?

Answer 1

If you lease a vehicle, you still need auto insurance. Leasing a vehicle can make perfect sense for many consumers, but most banks will require that you purchase full-coverage car insurance to cover any damages or liabilities that you might cause during the course of operating the leased vehicle.

Insurance for a Leased Vehicle

Full coverage insurance is a term that is used to describe insurance that is above the minimum amounts that are required by your state. A full coverage insurance policy will cover the market value of the leased car if you experience a loss while you are driving, and this type of insurance will pay regardless of who causes the accident. Full coverage insurance includes comprehensive insurance coverage and collision insurance coverage as well as coverage to protect you from uninsured and underinsured motorists on the road. A full coverage policy is more expensive than a liability-only policy, since a liability-only policy will only cover damages to other drivers or to property; it does not cover any damage to your vehicle.

Limits Required by Leasing Bank

You should also check with the leasing bank to determine the limits that your full coverage policy will need to cover. More than likely, your leasing bank will require that you carry a higher limit than your state requires. An increased limit will protect you in the event that you are involved in a serious auto accident.

Gap Insurance

In addition to regular auto insurance, you may be required to purchase "gap" insurance when you lease a new car. While most leases will require that you carry full coverage insurance, including comprehensive and collision coverage, on a leased vehicle, many will also require the purchase of gap insurance. As the name implies, gap insurance is insurance that will pay for any gaps between what your insurance pays and what is owed on the lease if you experience a loss. Gap insurance is important because vehicles depreciate in value, and if you have a loss early on in your lease, you may find yourself owing more on your leased vehicle than the insurance company is willing to pay. Sometimes this gap insurance is bundled into the cost of your lease and you don't have to actually choose an insurer or add anything onto your insurance policy. When compared to the coverage that it provides, it is generally inexpensive and adds just a few dollars each month onto your lease payment.