Do I Need Insurance If I Have a Leased Car?
The answer is YES, you must have auto insurance on a leased car. The entity financing your vehicle, whether that’s a bank or an auto dealer will require you to carry collision and comprehensive insurance coverage. As insurance regulations vary from state to state, you may also have to carry additional coverage per state guidelines.
What is Collision and Comprehensive Coverage?
Collision insurance covers damages resulting from an accident with another vehicle or another object. Comprehensive coverage reimburses the insured for any damage caused by something other than a collision such as a natural disaster, theft, vandalism, or harm done by animals such as deer or birds.
Other Insurance Requirements
“Gap” insurance may also be required by the leasing company in the event your leased car cannot be repaired and can only be replaced.
Gap insurance covers the difference between the amount you owe the bank for your vehicle and the amount of money you’ll receive from the insurance company to replace the vehicle.
The reason a gap (or difference) occurs in the first place is that while the insurance company writes you a check for the actual cash value of the vehicle (value plus depreciation), you still owe the dealer or bank money for the original agreed upon value of the vehicle.
How Gap Insurance Works
Gap insurance on a leased vehicle is typically rolled into your monthly lease payment. Gap policies are not purchased independently from the rest of the insurance policy. The auto dealer or bank will usually buy what’s called the master policy from an insurance company to cover all the vehicles they lease and charge you, the consumer a “gap waiver.”
As a result, if your car becomes irreparable, you won’t have to pay the dealer or bank the gap amount. Ask the auto dealer or bank about their gap coverage before you rent your vehicle from them.
Another Tip on Gap Insurance
If you purchased the vehicle rather than leasing it, consider buying a gap insurance policy. The last thing you want is to have to come-up with a huge lump of money at once to replace your vehicle if it’s totaled before you own the title.
You might want to ask your insurance agent about gap insurance. At minimum do more research online to see if you need gap insurance. Some states do not offer this benefit.
Do I Have to Buy Insurance?
YES! Most states require auto liability insurance as a minimum requirement. Financial responsibility laws in some state dictate that if liability insurance isn’t required, the uninsured must then be able to cover potential claims with the sale or liquidation of personal assets.
If the driver does not have enough assets to cover potential claims, they must then purchase liability insurance. As the entire point of purchasing insurance is to protect assets, an uninsured driver may be putting those very assets at higher risk.
How Much Insurance Should I Buy?
Generally, insurance as well as consumer groups recommend a minimum of $100,000 toward bodily injury protection for each person on the policy and $300,000 toward each incident. This recommendation is much higher than most state minimums because on average, accidents cost much more than the state coverage mandates.
If you decide to drive a financed vehicle, the lender might require comprehensive insurance coverage as well as collision insurance to be a part of the vehicle loan agreement.