In this article, we at the MarketWatch Guides team outline the requirements for insuring a leased car, including how much coverage you need, where to find it and how much it will cost. We also delve into the benefits of gap insurance and the best car insurance companies to consider for leased vehicles.
Key Takeaways
- Your leasing company may ask you to have “full coverage,” which means property damage and bodily injury liability plus comprehensive and collision insurance.
- Some states require uninsured motorist coverage and personal injury protection for your car, regardless of whether it’s leased or not.
- Make sure you understand insurance requirements in your state and any additional requirements from your leasing company.
- Insurance for a leased car should cost about the same as insurance for a car you own.
The MarketWatch Guides Team is committed to providing reliable information to help you make the best decision possible about insuring your vehicle. Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. After 800 hours of research, the end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Learn more about our methodology and editorial guidelines.
Do I Need Car Lease Insurance?
If you lease a car, you must have car insurance for the leased vehicle. When you lease a vehicle, you’re buying the right to drive it for a certain amount of time — usually two to three years — before returning it to the dealership. The leasing company (or lessor) retains ownership of the vehicle throughout your lease.
Given their ownership stake, lessors and leasing companies require a driver to carry enough insurance to protect their investment. They also are the ones to receive any payout that results from a claim.
You must show proof of insurance before you take possession of a leased vehicle. How much coverage you need varies by state and by leasing company.
State Requirements for All Vehicles
Most states require some form of liability coverage, regardless of whether your car is leased or not. This type of insurance covers:
- Property damage liability: If you’re responsible for damaging someone else’s vehicle or property in a covered accident, property damage helps cover the cost of repairs.
- Bodily injury liability: If you’re responsible for hurting someone — whether in your car or someone else’s — this coverage helps to pay for their medical bills, hospital stays and physical therapy and other related damages.
Most states require coverage of at least $20,000 for property damage liability and $50,000 for bodily injury liability. The only states that don’t require liability coverage are New Hampshire and Virginia.
Required Car Insurance in Some States
Most states require liability, but quite a few states also require uninsured/underinsured motorist coverage (UM/UIM) or personal injury protection (PIP), regardless of whether your car is leased or not. Here’s a breakdown of the three types of car insurance required in some states:
| Description | Where It’s Required | |
| Uninsured/underinsured motorist | UM/UIM bodily injury covers you and your passengers for medical bills, lost wages and pain and suffering if you’re in an accident with someone who doesn’t have any or enough insurance. This is required in the District of Columbia and 19 states. | In the District of Columbia and 19 states |
| Personal injury protection | PIP covers your medical expenses, regardless of who was at fault for an accident. In some states, it’s called “no fault” coverage. PIP covers things like ambulance bills, emergency room charges, follow-up medical visits, lost wages, prescriptions and transit to and from your appointments. |
In the 12 “no-fault” states and Delaware and Oregon |
| Medical payments | Medical payments (MedPay) coverage helps pay for medical bills for you and passengers in your car if any of you get hurt in an accident. | In Maine |
Leasing Company Requirements
In addition to the minimum coverage required by your state, your leasing company also may mandate that you carry comprehensive and collision coverage. The combination of these is also known as “full coverage.”
- Comprehensive insurance: Sometimes called “other than collision,” comprehensive covers your car for damage sustained from non-collision events. These can include trees falling on your car, hail damage, theft and vandalism.
- Collision insurance: This pays to repair or replace your car if you accidentally hit another car or object. It also covers damages done when another vehicle accidentally runs into you. In most states, you must have comprehensive to buy collision.
Gap Insurance
Along with full coverage, your leasing company may also require gap insurance, which covers any depreciation from the time you lease the car to the time it was damaged in an accident.
New cars depreciate quickly. According to the Insurance Information Institute, most vehicles lose 20% of their value within the first year. Gap coverage protects you if you’re “upside down” on a vehicle — meaning you owe a bank or finance company more money than the car is presently worth.
Here’s how gap coverage works:
- You lease a vehicle worth $25,000.
- One year later, you’re in an accident that totals the vehicle.
- You owe $23,000, but your insurer estimates the value of the vehicle at $20,000.
- Gap insurance covers the $3,000 “gap” between what you owe and what the vehicle is worth.
Is it More Expensive To Insure a Leased Car?
Insurance companies don’t determine rates based on whether your car is leased or financed. If you lease a vehicle, however, your leasing company may require that you purchase full-coverage car insurance.
The national average cost of full coverage is $2,008 per year while the average cost for minimum coverage is $627 per year. While buying minimum coverage may seem like a better deal in the short term, you could end up paying far more out of pocket in the long run.
For instance, say that you decide to purchase only the minimum liability coverage required for a vehicle. Over a year, you might save as much as $1,318 compared to what you would pay for an auto insurance policy with comprehensive and collision coverage. Sounds good, right?
Now, imagine that you’re involved in a car accident. The damage done to your vehicle will cost $8,000 to repair. Because you don’t have collision insurance on your policy, your provider won’t pay for the claim. You, then, are responsible for the full $8,000. You may have saved money initially, but now you owe $6,905 more than you would have if you’d opted to purchase more protection.
Car insurance exists to protect you financially. When deciding how much you should buy, think about how much you could afford to pay following an accident. Unless you have a lot of extra money set aside for emergencies, it’s in your best interest to pay for full-coverage car insurance.
How To Lower Lease Insurance Costs
The following tactics can all help you save on auto insurance for leased cars.
- Drive safely. Maintain a clean driving record with zero accidents or driving violations. In addition to offering discounts to drivers with no claims, many insurance companies will also offer discounts to drivers who’ve completed a driver safety course.
- Research discounts. Car insurance companies offer discounts as a way to make their policies more attractive than those of their competitors. Get quotes from a few different insurance carriers to see who offers you the highest overall discount.
- Increase your deductible. The higher your deductible, the lower your monthly premium will be. Raise your deductible to an amount you can comfortably afford to pay out of pocket.
- Update your policy regularly. Certain life events (like getting married, having a baby or moving) can impact your car insurance rates. Check your policy regularly to make sure you’re getting any additional savings you may now qualify for.
How To Insure a Leased Vehicle
Once you know how much insurance you need, you can start getting quotes from different carriers online. When comparing policies, keep variables like coverages, limits and deductibles the same for each quote. This ensures that you’ll get an accurate picture of how different options stack up.
You’ll need to have the following info on hand to get a quote for insurance for your leased vehicle.
| Vehicle Information | Driver Information |
| Any safety features or anti-theft devices Make, model and year Odometer reading Vehicle identification number (VIN) Where you usually store it |
Any information that might qualify you for discounts, such as whether you’re in the military or have completed a safe driving course Driving history Driver’s name and date of birth Driver’s license number Social Security number |
What Are the Requirements for Insurance on a Leased Car?: The Bottom Line
Each state has minimum car insurance requirements on a leased car. You may also have additional requirements set by your leasing company.
When getting quotes online, you’ll need to input your ZIP code first. From there, the insurer will recommend coverage based on your specific state-minimum requirements. You’ll also indicate whether your vehicle is leased or financed to narrow down the options that meet your needs.
Top Auto Insurance Recommendations
Ready to look for an insurer for your leased car? Here are our top two recommendations for great coverage at affordable prices.
Geico: Best for Budget-Conscious Drivers
Geico tops our list for affordable car insurance. The company also has high customer service ratings from the Better Business Bureau (BBB) and an excellent financial strength rating from AM Best. If you’re not sure how much coverage you need for your leased vehicle, try using Geico’s car insurance calculator. It takes less than a minute and offers personalized recommendations based on specific details that you input.
Read more: Geico Insurance Review
Progressive: Low Rates for High-Risk Drivers
Progressive, the second-largest insurer in the United States, is another sound option for leased car insurance because it offers gap insurance (also known as loan/lease payoff coverage) for about $20 per year. Gap insurance is important when insuring a leased car because it covers the remainder of your lease when the amount you still owe exceeds the vehicle’s current value.
Read more: Progressive Insurance Review
Compare: Geico vs. Progressive
What Are the Requirements for Insurance on a Leased Car?: FAQ
Below are frequently asked questions about the insurance requirements for a leased car.
Some pros of leasing a car include a smaller down payment, lower monthly payments, fewer repair costs and potential tax benefits. Some cons are that you earn less equity, have fewer financial assets and are never free from payments.
Leasing a car can help build your credit score if you make your lease payments on time. Finance companies report late payments to the credit bureaus, so keep up with your payments to avoid damaging your credit.
Because new vehicles depreciate quickly, you may owe more on a leased car than what it’s currently worth. Gap insurance covers any gaps between what you owe and the car’s actual cash value. For instance, if you total a car valued at $15,000 when you still owe $18,000 on it, gap insurance will cover that $3,000 disparity.
There are both minimum- and full-coverage car insurance policies. A minimum-coverage policy only means having the car insurance required by your state. This is usually liability insurance, but can also include personal injury protection and/or uninsured/underinsured motorist coverage. A full-coverage policy means having at least liability, comprehensive and collision insurance to protect your car. Read our guide on the types of car insurance to know more.
Our Methodology
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
- Industry standing (20% of total score): Our research team considered market share, ratings from industry experts and years in business when giving this score.
- Availability (10% of total score): Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
- Coverage (30% of total score): Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
- Cost and discounts (25% of total score): Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
- Customer experience (15% of total score): This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.
Our credentials:
- 800 hours researched
- 45 companies reviewed
- 8,500+ consumers surveyed
*Data accurate at time of publication.
link