Do you have to have full coverage insurance to lease a car?

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Things to Remember...

  • When you sign a lease contract, it’s your responsibility to buy full coverage auto insurance on the day that you take possession of the vehicle
  • While there’s not one specific definition of full coverage, a policy that has full coverage typically consists of comprehensive and collision coverage
  • Comprehensive and collision coverage are first-party insurance coverage options that each pay for damage repairs or vehicle replacement when you have a loss that’s covered
  • If you don’t maintain full coverage on your vehicle, you’ll be in violation of your contract. You could have your vehicle repossessed or you could be forced to pay insurance fees in your contract
  • Not only do you have to carry physical damage coverage, you must also carry GAP insurance. Many contracts include the premiums for GAP insurance so that you don’t have to buy the protection on your own

Auto leasing has gained a lot of popularity in the last few years. In fact, more than a quarter of new car sales that have been reported in the last year were actually leased.

Since the rate of auto leasing is higher than it’s ever been, with about 27 percent of consumers choosing to lease over finance, it’s fair to say that many people want a luxury car for a fraction of the cost.

Before you become the one in four consumers who choose to lease instead finance, it’s important to assess all of the costs and not just the total cost of the lease itself. One cost that you can’t avoid is your auto insurance expense.

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Since maintaining the right coverage is a must, here’s a guide to help you build your insurance policy for a leased car:

Is the cost of auto insurance included in your lease payments?


If you skim through the financial details of your contract, you’ll find all of the various charges that are included in your monthly installments. When you browse through all of the charges that are included in the lease, you won’t see a charge for your auto insurance.

Auto insurance is something that you buy separately from the lease even though it’s a requirement.

It’s your duty to review the requirements that are written into the terms of your financial agreement before you sign any official documents.

Some of the charges that should be found in the lease contract include:

  • First payment
  • Capitalize cost reduction
  • Security deposit
  • Acquisition bank fee
  • Disposition fee
  • Sales tax
  • Registration, license, title, and tag fees
  • Property taxes
  • Documentation fees

What type of auto insurance do you need when you’re leasing?

Virtually all leasing companies require their lessees to buy auto insurance and keep the coverage active.

You can’t carry just any type of coverage to comply with your contract. Since you’re technically renting instead of owning, the company has a huge financial interest in the car.

This is why the lessor will require you buy and maintain full coverage insurance.

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What does full coverage insurance mean?

When you’re buying an insurance policy, you can’t just check a box that says “I want full coverage.”

Instead, you have to add the right options to your plan so that it adequately protects you and also satisfies your lender.

If you’re reading over your contract, carrying full coverage means that you have a policy with comprehensive and collision.

What do comprehensive and collision benefits pay for?


Both comprehensive and collision coverage are physical damage coverage options that will pay for your mechanic bills and body work if your car is damaged after a long list of different types of losses.

These are both first-party benefits that are optional, unlike the third-party benefits that are required by the state.

In general, comprehensive is the coverage that pays for non-fault losses like fire, theft, flood, vandalism, and even glass breakage.

Collision will pay for other losses when you collide with a car or some other type of property if you’re negligent in the accident.

You must satisfy your deductible to make a claim against either coverage.

Can you carry minimum limits of liability?

One of the drawbacks of leasing is that you can’t just carry the limits of liability that the state requires.

Since the state’s requirements for third-party coverage are fairly low, the lessor will require you to carry higher limits of liability to ensure that you and the company are protected in the event of a lawsuit. Here’s what’s commonly required:

  • $100,000 per person in Bodily Injury Liability
  • $300,000 per accident in Bodily Injury Liability
  • $50,000 per accident in Property Damage Liability

Listing the Leasing Company as a Loss Payee and Additional Insured

Another requirement that you can’t afford to overlook is that you must have the lessor named as a loss payee and an additional insured on your policy.

The additional insured is an organization who is protected under the contract if there’s a damage claim or liability claim filed.

If you file a claim for physical damage on the car, the loss payee that’s listed will be notified.

Any check that’s issued will be made out to you and the loss payee, so the lessor must sign off before the check can be cashed. The lessor’s Commercial General Liability contract also requires the primary policy to list the lessor as an additional insured.

Do you have to have any other type of coverage?


You need to carry high limits of liability and you also need physical damage coverage, but that’s not where the requirements stop.

All vehicles that are leased need to be covered by GAP insurance as well. GAP, which stands for Guaranteed Auto Protection, helps to cover the depreciated value of the car if it’s totaled.

In most cases, the cost for GAP coverage is automatically added into your monthly payments. The lessor does this to ensure that the coverage is always available. If the coverage isn’t added into your payments, you need to see if you can add the GAP protection to your insurance policy.

If you want to lease a car but you’re not excited about the insurance requirements, it’s time to get quotes. One of the best ways to get dozens of quotes quickly is to use a rating tool online. Enter the vehicle information, plug in your personal information, and compare the quotes you get.

To find insurance that fits your budget today, just enter your zip code into the FREE tool below!

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