Auto Insurance for Leasing Done Right

Auto Insurance

INSURANCE (MP) Most car lease companies require you to maintain full-coverage or auto insurance to protect both you and themselves. This means both liability and collision/comprehensive coverage. If you plan to lease your next car or are already leasing, you know that lease companies require extended insurance coverage, which makes it important to shop for the best rates for that level of coverage. Your old insurance company might not be the best or the cheapest.

The details of exactly what and how much is required is specified in the small print of your lease contract. Specifics can vary by lease company.

The amount of coverage specified in your lease contract is a minimum required amount and is often inadequate in these days of large car accident legal settlements. You can always purchase more coverage if you feel the lease company’s requirements are not sufficient protection for you.

What’s the deal with auto insurance for leases?

When you lease, your vehicle belongs to the lease company. They want to make sure that their investment is covered should you have an accident that damages or destroys the vehicle, or if the vehicle is stolen.

They may also want you to have sufficient liability coverage in case you are at fault in causing an accident. This not only protects you from financial disaster, but it also protects the lease company if they should be held partly responsible.

Some lease companies require as little as $20,000/$40,000/$5000 liability, which might not even meet some states’ legally mandated minimums. This is explained as follows:

  • Liability coverage: $20,000 per person / $40,000 per occurrence
  • Property liability coverage: $5000
  • Comprehensive and collision for actual value with no more than $1000 deductible
  • In Canada, $1,000,000 in liability coverage is required

Other companies may require as much as $150,000/$300,000/$50,000 liability coverage. Generally, this higher level of coverage is more common.

This may be more coverage than you would normally buy, which could mean an additional leasing expense — unless you know how to get better rates. Most people are already paying too much for insurance before they lease — for less coverage.

With a little shopping, it’s not difficult to get the additional coverage for the same cost as your previous coverage.

Many people attempt to get by with only the minimum insurance coverage required by law but it’s a big risk since there’s so much to lose. Accidents do happen. Large lawsuits are common. If you have insufficient car insurance coverage, you can be personally sued for additional money after your insurance has paid. Be aware that buying only minimum required liability insurance coverage violates the full-coverage requirements of your lease contract.

Six things you need to know about car lease insurance

1. Coverage is mandatory

Before you drive off the lot in your new car, make sure you’re covered. If you don’t already have car lease insurance to transfer to the new vehicle, you’ll need to buy it before you leave the dealership or leasing office. Most states require some minimum level of liability insurance, and your leasing company may require more than state minimum levels. Find out more with eSurance, one of the best auto insurance companies online with the lowest rates.

2. Your limits may be higher

Leasing companies often require high liability insurance limits for your leased car. Some may require you carry a lower deductible too, or make you put money in reserve for the duration of the lease if your deductible is higher.

3. Collision and comprehensive may be required

In addition to the basic liability insurance for leased cars that is mandated by most states, you may be required to carry collision or comprehensive car insurance, too. Collision insurance pays for damage to your vehicle if you hit someone’s car, another vehicle hits you or your vehicle rolls over, regardless of who is at fault. Comprehensive coverage helps pay for damage to your vehicle from events other than a car accident, like theft, vandalism, and certain natural disasters.

4. You’ll need to pay for original replacement parts

Some leasing companies stipulate in the lease agreement that if any repairs are made as a result of a comprehensive or collision claim, you must use only Original Equipment Manufacturer (OEM) parts, which are often more expensive than aftermarket parts. Fortunately, there is a low-cost option available with most car lease insurance policies that cover the difference between the cost of factory parts and generic parts.

5. Gap insurance can protect you

Gap insurance provides extra protection in addition to your basic car insurance for leased cars. If your leased vehicle is stolen or totaled in an accident, this optional coverage fills in the gap between the lease amount still due on the vehicle and what your insurance company would pay for a regular collision or comprehensive claim. Learn more about gap coverage and how it could protect you.

6. There are still ways to save on your car insurance

If you insure multiple vehicles with the same company, or if you bundle your car and homeowner’s insurance, you may qualify for substantial discounts on automobile insurance. If your driving record is clean of any accidents, or if your new vehicle comes equipped with an anti-theft device or passenger restraint system, you could save even more depending on where you live and on your insurer.

Rates between different insurance companies vary greatly

Here are some of the possible discounts you should ask about. Be aware that all auto insurance companies may not offer all of these discounts.

[ ] $500 deductible
[ ] $1,000 deductible
[ ] More than one car
[ ] No accidents in 3 Years
[ ] No moving violations in 3 years
[ ] Driver training courses
[ ] Defensive driving courses
[ ] Anti-theft devices
[ ] Good credit score
[ ] Low annual mileage
[ ] Airbags
[ ] Anti-lock brakes
[ ] Traction and stability control systems
[ ] Daytime running lights
[ ] Student drivers with good grades
[ ] Auto and homeowners coverage with the same company
[ ] College students away from home
[ ] Long-time customer
[ ] Other discounts

The key to car insurance savings is not the number of discounts, but the final premium cost. A company that offers few discounts may still have lower overall rates.

Recommendations

Before the Internet came along, it was quite a chore to shop for auto insurance. Now, it’s a breeze because most companies have websites.

Insurance brokers are also online, making it extremely easy to get multiple quotes from different companies from a single source. They save you the trouble of contacting individual insurance companies because they do it for you. The services of these online brokers are free to consumers. They make their money from the insurance companies.

You are under no obligation to accept any quote offered by these companies. There are no fees or costs involved to get quotes from them. It’s a no-lose deal. If you don’t get rates you like, you can shop elsewhere.

When asking for a quote, you’ll get the most accurate quote if you provide all the information requested, including your social security number. If you choose to withhold some of this information, you can still get a “ballpark” quote, but that rate could change once you provide all your information later.

Because some companies base rates partially on credit scores, providing your social security number allows the company to access your credit records for a more accurate quote. These credit inquiries are considered “soft” inquiries and do not count against your score.

Don Briscoe
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Don Briscoe

Finance educator, advisor, and leading voice in the global financial literacy movement.Founder and editor of MoneyPacers.com.He lives and enjoys life with his family in New York.
Don Briscoe
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