What You Need to Know About Insuring a Leased Car

Leased cars must be insured to the state minimum car insurance requirements and the minimum requirements set forth by the leasing company. Because the leasing company still holds the title to the vehicle, they are considered the owner. You must uphold any insurance coverage they dictate to drive the car off the lot. 

Since the leased car is still legally possessed by a leasing company, they require additional coverage on top of state minimum requirements. The car you lease from them is a money-making asset, and the insurance coverage you must obtain compensates the leasing company should a total loss occur. With this additional coverage requirement typically comes a higher monthly car insurance premium. 

Even the best car lease deals require minimum coverage for car insurance policies. Each leasing company has its own set of requirements. It pays to research these requirements before you look into leasing. You can see in real-time what your monthly premiums would be and how much it costs to insure various leases from select dealers.

Car subscription services like FINN simplify the entire insurance process. Rather than researching and comparing insurance rates, you pay a single monthly fee that integrates insurance automatically. There’s no need to sign up for a policy or find a local agent. 

State law requires any car that drives on the road to have car insurance. Specific insurance requirements for all vehicles, let alone a leased car, vary from state to state. Some states have more stringent requirements than others. Lack of proper car insurance can result in fines, a suspended license, and even jail time.  

What coverage is required for a leased car?

Leased car insurance requirements vary between leasing companies but can include: 

• Liability coverage, which includes bodily injury and property damage
• Uninsured or underinsured bodily injury coverage
• Personal injury protection coverage
• Comprehensive and collision coverage

Insurance companies may refer to comprehensive and collision as “physical damage insurance.” Collision is self-explanatory, while comprehensive covers acts of nature, vandalism, and theft. 

For example, Tesla requires the following insurance coverage on leased vehicles: 

• Liability: $100,000 per person and $300,000 per accident
• Property damage: $50,000
• Physical damage insurance: Full value of the vehicle with a $2,500 maximum deductible

General Motors (GM), home to Buick, Cadillac, Chevrolet, and GMC, requires similar coverage of its lessees: 

• Liability: $100,000 per person and $300,000 per accident
• Property damage: $50,000 per person and $500,000 per accident or combined single limits 
• Comprehensive and collision: Including fire and theft, with a $1,000 deductible

The higher your credit score, the less you could pay in car insurance premiums. Several factors influence how much you pay for car insurance, including where you live. 

Do leased car insurance requirements vary by state? 

Yes, car insurance requirements vary by state. Each state sets out minimum coverage requirements for drivers and their cars registered within state lines. Most states require liability coverage for bodily injury and property damage, but some stipulate additional coverage requirements. 

For example, California requires $15,000 in coverage for bodily injury per person, $30,000 per accident, and $5,000 for property damage. Colorado has similar requirements, though property damage covers up to $15,000. However, Texas requires significantly more coverage, at $30,000 per person and $60,000 per accident for bodily injury coverage, and $25,000 for property damage. 

Compare that to New York, which requires $25,000 per person and $50,000 per accident for uninsured motorist bodily injury liability and $50,000 in personal injury protection coverage. This coverage is in addition to $25,000 per person and $50,000 per accident in bodily injury liability coverage, and $50,000 in property damage. 

Do you need gap insurance?

Inquiring about gap insurance is one of the bigger questions to ask before leasing a car. State law doesn’t require you to carry gap insurance, which is “guaranteed asset protection” insurance. However, gap insurance can be an excellent addition to your policy, especially if you’re leasing or financing a vehicle. 

If the insurance company totals your leased car after an accident, gap insurance will help cover the remainder of your lease payments. Many drivers financing their vehicles also obtain gap insurance for the same reason. However, gap insurance doesn’t cover lease penalties or overdue lease payments.  

Many people don’t know that dealerships and leasing companies often purchase gap insurance on their fleets of vehicles, typically at a discount. If the dealership already has a gap insurance policy, it doesn’t make sense to pay for an additional policy from out of your pocket. Ask about any existing gap insurance and obtain a copy of the gap policy for your records. 

When you insure a leased car, you typically pay more for your monthly premium than if you only opt for liability coverage. Most, if not all, leasing companies require additional coverage to what is required in each state, so you’ll be compliant with local insurance laws. At the same time, you should consider gap insurance for leased and financed vehicles. 

Leasing companies may offer gap insurance coverage so you don’t have to obtain coverage. However, financed vehicles typically don’t have this type of insurance coverage. Most automotive manufacturers require full coverage for financed vehicles. Full coverage tends to cost the most because it includes comprehensive and collision. 

One of the 10 reasons not to lease a car includes paying more for car insurance, especially if you don’t obtain gap insurance. Paying more for car insurance on a leased vehicle is common because leasing companies require additional coverage beyond what meets minimum state requirements. This increase in coverage often results in higher monthly premiums. 

However, if you consistently pay for full car insurance coverage on your vehicles, you may not see an increase in your monthly premium. Full coverage can meet state minimum and leasing company requirements with one policy. 

Yes, you can lower the cost of leased car insurance premiums. No matter how long your lease on a car is, you can qualify for specific discounts with your current car insurance carrier. Here are a handful of ways you can lower the cost of your leased car insurance:  

• Maintain a clean driving record
• Avoid reckless behavior, such as speeding
• Insure multiple cars with the same insurance carrier
• Obtain a discount for your student or military status
• Take a defensive driving course
• Install a telematics device that monitors your driving habits

Your monthly car insurance premiums factor in several variables, including the age and type of vehicle, your driving history, the amount of coverage you elect for, and any previous claims you’ve made. 

You must obtain car insurance for your leased car before you leave the dealership lot. Here’s a quick reference guide on securing car insurance for your leased car: 

1. Request the minimum insurance requirements, including specific dollar amounts, from the leasing company. It’s best to obtain the requirements in writing for future reference if necessary. 
2. Shop around for quotes. Check with your current insurance carrier (if you have one) to see if you qualify for a discounted rate based on your situation. 
3. Once you’ve found the policy and carrier you prefer, purchase the policy. Ensure the carrier lists the leasing company as the loss payee and additional insured. This designation establishes the leasing company to receive the payout should a total loss occur. 
4. Obtain any necessary documents to present as proof of coverage. Make a copy for the leasing company for their records. Maintain your policy for the life of the lease, or update the leasing company if you change insurance carriers. 

FINN car subscriptions don’t require shopping around and comparing insurance rates. Instead, you can select insurance to add to your monthly payment and pay one fee. The only other cost you have is fueling the ride you subscribed to. 

It can be overwhelming to juggle everything that comes with a lease. If you’re feeling overwhelmed, consider the alternatives to leasing: 

• Long-term rental: Most people rent a car for a week or two. However, long-term rentals can help you solve your car problem for a month or two. 
• Car-sharing program: You can often find car-sharing programs in large cities. Share a car for a day trip or a few days away. 
• Purchase a car: Buying a car can add even more stress to your plate. However, you are making payments toward an asset you’ll eventually own.

You can also take advantage of car subscription services like FINN. Choose the vehicle you want to subscribe to for six to 12 months, and FINN will deliver it straight to your door. In addition to a single monthly payment that includes registration, insurance, maintenance, and roadside assistance, you only have to pay for the gas to get where you want to go.