Business Lease Car Insurance

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Things to remember...
  • Car insurance is a mandatory requirement in most U.S. states. This rule applies to both individuals and businesses, whether the car is owned or leased
  • Your business vehicles are not covered in your business owner’s policy (BOP), you’ll have to purchase a separate auto insurance policy for your vehicle
  • In most states, you will be required to purchase property damage and bodily injury liability coverage for your business vehicles

Leasing a vehicle provides an easier way for individuals and companies to drive new cars.

Leased vehicles come with reduced upfront costs and high levels of convenience.

However, you will still have to purchase auto insurance for the vehicle, and this is where it gets a little tricky.

Every time the legal owner and the person keeping the car differ, carriers, especially mainstream auto insurers, have a hard time drafting auto insurance policies. You will still get a policy if you follow the proper criteria.

The rates are relatively similar, but if the correct procedures are not adhered to when purchasing auto insurance coverage for a leased vehicle, you may have problems getting the insurer to pay a claim.

Compare car insurance quotes today using our free rate tool above.

How to Lease a Car

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Basically, a lease is a long term rental. You get to use the vehicle for an extended time frame while making monthly payments.

Usually, a lease could last up to three years, and that’s when you turn in the car or buy it at a price specified in your leasing contract. When it comes to leasing, there are some requirements:

  • You are required to purchase insurance coverage for the vehicle.
  • You must service the vehicle.
  • Some leases will come with mileage limitations, and if you exceed them, you are charged.
  • Any repairs to the vehicle will come out of your pocket.

You don’t own the vehicle. Any damage the vehicle sustains in the course of your lease will come out of your pocket. However, purchasing auto insurance coverage for your leased business vehicle can protect you from such financial losses.

Common Terms in the Car Leasing Business

  • Rebates and Warranties A rebate is a fixed sum that the leasing company will refund to you at the expiry of the lease if certain conditions are met. Read and understand the terms of the warranty before you drive off with the vehicle.
  • Insurance Protection – The lease should include gap insurance, a type of coverage designed to protect you from paying the leasing company the value of the car should it be totaled in an accident or stolen.
  • Drive-Off Fees  The drive-off fee is an upfront payment (deposit) you will be asked to make and will include your fee for the first month. A drive off fee is technically not a down payment.

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Insuring a Leased Business Vehicle

As a business owner, you will need auto coverage for your leased business vehicle be it a van, truck, or a car. You will have to purchase a separate policy for your company cars since the business owner’s policy doesn’t cover automobiles.

You will be required to meet the minimum required auto liability insurance in your state in case you or one of your employees gets in an accident while driving the company car.

Some states will even require you to have Personal Injury Protection (PIP) or the uninsured/underinsured motorist protection for your business vehicle.

How much coverage your leased business vehicle will carry depends on your state and your agreement with the leasing company.

In most cases, on top of the state-mandated coverage, the leasing company requires business owners to carry both comprehensive and collision policies for their cars.

Essential Coverage for Leased Business Cars

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– Liability Coverage

BACF (Business Auto Coverage Form) is the document used to provide auto liability coverage for a business. By definition, the BACF is a form provided to businesses by the insurance provider when drafting the auto insurance policy for the company vehicles.

The BACF contains detailed information pertaining to the policy. Some of the information outlined in BACF include:

  • Covered incidences or the cause of damage.
  • The type of damage covered.
  • Types of the vehicles.
  • Both insurers and insured obligations in the event of a covered incidence.

Coverage includes both leased and vehicles owned by the business. The BACF helps businesses get practical coverage solutions by providing relevant information and available options.

Each vehicle used in your company’s business activities will be matched to its specific coverage which means that you can choose each vehicle’s coverage type depending on its features and the type of coverage you need for it.

– Physical Damage Coverage

Physical damage coverage for a business vehicle includes comprehensive, collision and specified perils.

– Comprehensive Coverage

Besides theft, comprehensive coverage covers all damages unrelated to a collision. These damages can result from any of the following:

  • Natural disasters i.e. storm, floods, earthquakes
  • Hitting wild animals or birds
  • Fire
  • Falling objects

Policy exclusions in comprehensive coverage include acts of war, mechanical breakdown, and wear and tear.

Collision coverage

Pays for damages resulting from the vehicle colliding with other vehicles on the road or if the car overturns.

– Specified perils coverage

Provides protection from a specified set of risks clearly spelled out in the policy.

The actual cash value (ACV) is the amount the insurer will pay if the car is stolen or sustains physical damage. The ACV is usually adjusted to match the vehicle’s current value according to its physical condition and depreciation.

Therefore, the older the vehicle is, the less the settlement amount.

When You Use Your Leased Business Vehicle for Personal Errands

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If you use the vehicle for non-business purposes, you will have to close the coverage gap by attaching the Drive Other Car Coverage Endorsement coverage to your policy since basic liability and physical damage coverage does not cover personal use.

Bring down auto insurance rates for your leased business vehicle by comparing quotes from multiple providers. Use our free comparison tool to get started today.

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