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Key Takeaways

  • Leasing a car is a convenient option for those passionate about driving the latest models of cars.
  • The insurance rates for a leased car depend on the state minimum requirements and the coverage demanded by the leasing company.
  • Car subscription services for leased cars are making a convenient change in the car leasing sector.

Car Insurance for a Leased Car - Introduction

Leased cars are nothing but long-term rentals. The main reason why people prefer rentals is budget constraints, along with a passion for driving different models frequently. Saving up to buy your own might be a long-term goal for many. However, you can still be your boss with a leased car, the reason why it is preferred. However, even if it is a leased car that you are driving, it requires insurance that will save you from unprecedented out-of-pocket expenses.

In the case of leased cars, the monthly down payment might be lesser, but the insurance premiums are different and higher than a car you own. Here we break down the specifics of the kind of insurance that a leased car demands.

Requirements for Insuring a Leased Car

You may not own it, but to drive around, it is mandatory to have insurance for your leased car. Along with the state-specified requirements, your premium rates and requirements will vary according to the model and the leasing company as well.

In addition, the leasing company must be listed as an additional insured and loss payee. This means that, as the owner of the vehicle, the Leasor receives any insurance payout for damages to the insured vehicle.

Common State Requirements

The state insurance requirements to drive a car around are more or less the same whether you own the car or not. However, the requisites can vary from state to state.  The two major liability insurance coverage required by any state would be property and bodily injury liability coverage.

Property Liability Coverage

Your property damage liability coverage pays for property damage caused by an accident for which you are at fault. It is required to cover at least $10000 per accident.

It could cover the cost of repairing or replacing the other party's vehicle and other damaged property, such as fences, structures, telephone poles, and other types of property. It also covers damage to other types of property, including fencing, mailboxes, and buildings caused by the policyholder's vehicle.

Bodily Injury Liability Coverage

During an at-fault accident, the bodily injury liability coverage will cover the medical expense of others. It is usually a minimum of $25,000 per person and $50,000 per accident.

The other liability coverage that some states require you to possess would include personal injury protection and uninsured and underinsured motorist coverage.

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What Type of Car Lease Insurance will my Leasing Company Require?

The most common coverage required by the leasing company is the one that will cover the possible damage that can happen during a crash.

Collision Coverage

This full coverage takes care of the expenses of repair from accidents regardless of who is at fault.

Comprehensive Coverage

It is an optional protection plan offered by insurance companies for an additional fee. It reimburses you for damage to your vehicle caused by a covered accident. Although collision insurance is not required by law, auto lenders frequently require it. It pays up to the actual cash value of the vehicle (ACV).

This will fully cover the repair or replacement expense for damage caused by fire, weather, vandalism, or even theft. This coverage usually takes care of the act of God insurance as well.

What are the additional requirements for insurance on a leased car?

Apart from the coverage demanded by the state and the leasing companies in general, there are few other coverages specific to certain companies. While a few of them will require a higher limit on liability coverage, others will demand a combination of coverage.

Additional Auto Insurance Requirements based on Leasing Company

Leasing Company Additional Insurance Requirements
Mercedes Benz ●  Full comprehensive and collision coverage

●  $2,500 maximum deductible for comprehensive and collision coverage

●  Bodily Injury Liability: $100,000 per person; $300,000 per accident

●  Property Damage Liability: $50,000 per accident
Kia ●  Full comprehensive and collision coverage

●  $1,000 maximum deductible for comprehensive and collision coverage

●  Bodily Injury Liability: $100,000 per person; $300,000 per accident

●  Property Damage Liability: $50,000 per accident
Honda ●  Full comprehensive and collision coverage
GM ●  Full comprehensive and collision coverage

●  $1,000 maximum deductible for comprehensive and collision coverage

Cost of Insurance for a Leased Vehicle

It is the coverage requirements that make a leased car expensive. However, leasing may result in lower monthly payments than financing. The leasing company may also stipulate a particular deductible for comprehensive and collision coverage, which will affect your insurance premium.

The cost of leasing a car may not spike if your policy meets minimum state requirements. In the case you do not have the required coverage, then the leasing company will buy insurance for you, known as forced-place insurance. This can be higher than the standard insurance policy that you choose according to your needs.

The major catch of leasing a car is that it doesn't require a long-term commitment like when you own a car. If you are fond of switching cars, and driving around different models, then leasing is a viable option, provided you scrutinize the terms and conditions before leasing the car.

Cost Of Leasing A Car By Company

Insurance Company Average Monthly Quote
Amigo USA $159
Kemper $160
Progressive $195
Nationwide $212
Elephant $219
Clearcover $221
National General $277
Mercury $301
AssuranceAmerica $324
Bristol West $323
The General $380

Cost Of Leasing A Car By State

State Average Monthly Quote for Leased Vehicles State Average Monthly Quote for Leased Vehicles
Alabama $257 Nebraska $234
Arizona $270 Nevada $369
Arkansas $277 New Hampshire $150
California $297 New Jersey $295
Colorado $316 New Mexico $217
Connecticut $319 New York $381
Delaware $372 North Carolina $180
Florida $348 North Dakota $186
Georgia $401 Ohio $190
Hawaii $149 Oklahoma $254
Idaho $181 Oregon $255
Illinois $207 Pennsylvania $241
Indiana $187 Rhode Island $365
Iowa $227 South Carolina $350
Kansas $275 South Dakota $192
Kentucky $363 Tennessee $233
Louisiana $457 Texas $316
Maine $158 Utah $224
Maryland $357 Vermont $160
Massachusetts $208 Virginia $251
Michigan $538 Washington $276
Minnesota $213 Washington, D.C. $302
Mississippi $279 West Virginia $275
Missouri $353 Wisconsin $223
Montana $212 Wyoming $151

Will Leasing a Car Affect the Cost of Insurance?

Yes, leasing can affect insurance rates. This is because when you lease a car, it usually demands full coverage or the coverage options as required by the leasing company. The chances for the policy rates to spike are higher if you don't meet the insurance limits of the leasing company as the car is owned by them.

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How Can I Lower my Leased Insurance Cost?

Though high insurance premium rates for a leased car are an existing reality, there are hacks to save on insurance for your leased car.

  ●  Scrutinize the terms of your leasing agreement

Instead of signing it off right away, it is important that you walk through the terms and conditions mentioned in the agreement. This will save you from forced-place insurance that can spike the rates beyond your budget.

  ●  Bundle your policies

If you get your policies from the same insurance provider, then you become eligible for a multi-policy discount. This can reduce the insurance premium rates.

  ●  Shop around

Researching the options available might be time-consuming, but it will let you compare quotes and know the discounts and coverage better. This will enable you to finalize the provider you want to take your policies from.

  ●  Raise your deductibles

Increasing your comprehensive and collision deductibles may reduce your premium, but it will cost you more if you need to file a claim. If you are considering increasing your deductible to reduce the cost of insuring a leased vehicle, ensure that you do not exceed the maximum deductible specified in your lease agreement.

  ●  Look for discounts

There are additional ways to reduce the cost of leased-car insurance than simply bundling. You may be eligible for discounts for driving safely, paying your policy in full, reducing the number of miles you drive, and working in a particular occupation or being a member of a certain organization.

Do I need Gap Insurance for my Leased Vehicle?

Gap insurance is a type of auto insurance coverage that car owners can purchase to protect themselves against losses that may occur if the compensation received from a total loss does not fully cover the amount still owed on the vehicle's finance or lease agreement.

It is mainly useful for new vehicles that depreciate rapidly once driven off the lot, and leasing a used car typically does not make sense. The maximum benefit you can receive from the gap insurance is limited. Depending on your policy, this amount can range between $30,000 and $125,000.

Thus, if you are leasing a new car, then having gap insurance can be beneficial.

Car Subscription Services

Car subscription services are a more convenient version of car leasing. It is offered by companies like Canvas (Ford), Care (Volvo), and Book (Cadillac). Their services include car maintenance and car insurance with the monthly cost.

These allow better flexibility as the subscription can be renewed every month, and the distance driven can be changed accordingly every month. If it is the long-term commitment issue that is pulling you back from leasing a car, then a car subscription can be tried.

Auto Insurance Data Methodology

The auto insurance rates published in this guide are based on the results of research completed by Way.com’s data team. Using a mix of public and internal data, we analyzed millions of rate averages across U.S. ZIP codes.

Quotes are typically based on a full coverage policy average unless otherwise noted within the content.

These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes will differ. Given this, it’s important to go through our insurance steps form to find how much you can save with way.com

Frequently Asked Questions

What's the difference between leasing and financing?

The major distinction between leasing and financing a vehicle is that a leasing company owns the leased vehicle, whereas drivers of financed cars have purchased it using a loan that must be repaid. Leasing lets a driver have temporary possession of the vehicle without ownership.

Since leasing companies have a stake in the vehicle's wellbeing, one tends to have less control over the extent of their insurance coverage. In most cases, they require more coverage than is required for a vehicle that is owned or financed.

Is it better to buy or lease a car?

The first answer that can be given in support of both is that it is a matter of preference. If you are someone who likes to switch cars and try different and latest models of cars, then leasing is the better option. It gives you the freedom to switch conveniently. However, leasing might not be as costly as financing a car, but the coverage levied by the leasing companies can tighten your purse strings.

Do I need to purchase gap insurance for a leased vehicle?

If you are leasing a new car, then opting for gap insurance can be beneficial in the case of accidents. Also, if your leasing company has included the cost of gap insurance coverage in lease payments, then you might not need separate gap insurance coverage.

How much insurance is required for leased vehicles?

The insurance rates for a leased car are not fixed. It depends on a variety of factors like the model, the year of its make, driving history, other non-driving factors like your location, the crash rates of the place, the state-required insurance limits, and the other coverages demanded by the leasing company.

Is leased car insurance more expensive?

The expenses related to a leased car are dependent on the insurance coverage and the model you have decided to lease. The expenses will be in check if you drive the car within limits. In case you exceed the miles, then you will have to pay an overage charge.

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