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

Leases don't usually include insurance. You'll have to have full coverage insurance to lease a car and have higher liability limits than state minimums, usually $100,000 per person for bodily injury claims and $50,000 for property damage.

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Mathew B. Sims is Editor-in-Chief and has authored, edited, and contributed to several books. He has been working in the insurance industry ensuring content is accurate for consumers who are searching for the best policies and rates...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance...

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Reviewed byDaniel Walker
Licensed Insurance Agent

UPDATED: Jun 26, 2020

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Things to Remember...

  • It’s important to review your leasing agreement to verify how much coverage that you’re required to carry
  • If you’re offered the option to add insurance to your contract, coverage is generally very expensive because it’s considered a convenience option
  • When you sign a lease contract, you must have full coverage insurance to lease a car on the day that you take possession of the vehicle
  • Comprehensive and collision coverage are options that each pay for damage, repairs, or vehicle replacement
  • Not only do you have to carry physical damage coverage, but you must also carry GAP insurance

Leasing a car is a convenient way to get a brand new car while still preserving your money. Not only do you get to enjoy that new car smell, but you also don’t have to worry about trade-in hassles when it’s time to move on to another car.

Maintaining the right coverage is a must, so here’s a guide to help you build your insurance policy for a leased car that will point you to finding low-cost, full coverage auto insurance in no time. We will also answer the question, “Does leasing include insurance?”

Your monthly payment and repair costs may be lower on a leased car, but that doesn’t mean that you save on all of your expenditures. Since leasing companies have very strict auto insurance rules, it’s common for your rates on a leased car to be higher than they would be on a financed car.

It’s never too early to start comparing auto insurance rates for leased cars now by using our FREE tool above! Enter your ZIP code to begin receiving quotes today.

Insuring Your Leased Car

Auto leasing insurance requirements have become increasingly important to understand as leasing has gained a lot of popularity in recent years. In fact, more than a quarter of new car sales that have been reported in the last year were actually leased.

You have to get insurance on a leased vehicle, but don’t worry because you can still find cheap insurance for leased cars if you are willing to shop around. The process for buying auto insurance is the same whether the car is purchased or leased.

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.

If you are asking “Does a leased car come with car insurance?” or “Do I pay insurance on a leased car?”, take a look at your contract. When you browse through all of the charges that are included in the lease, you won’t see a charge for your auto insurance.

While insurance isn’t included in the contract, some companies include an option to buy. So, when it comes to who pays for insurance on a leased vehicle, the answer is you do.

It can be tempting to buy your auto insurance coverage through the leasing company but think twice before you do it.

Like car rental agencies offer you the option to buy gas through the company for convenience, the leasing companies offer insurance for convenience. Unfortunately, that convenience comes at a cost.

Do you have to buy auto insurance when leasing a car?

Driving a leased car without insurance is not an option. When you lease a vehicle from a dealership, you are responsible for maintaining a certain amount of auto insurance coverage on the vehicle. This is because the vehicle is still owned by the dealership.

Do you need full coverage on a lease?

There are legal requirements, as well as requirements from the leasing company or dealership that the person leasing the vehicle is obligated to abide by. These requirements are in place to protect both the person leasing the vehicle and the interests of the leasing company.

If you are leasing a vehicle and get into a car crash or the car becomes damaged, the dealership wants you to carry enough insurance to fix the car to its pre-crash state.

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.

It’s important to note that lease auto insurance requirements will vary from state to state and dealership to dealership. For example, lease insurance requirements in Florida for 2019 will be different than lease requirements for Georgia in 2020. Also, Hyundai lease insurance requirements will be different than Nissan, Honda, or Audi lease insurance requirements.

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Can you carry the minimum limits of liability auto insurance?

One of the drawbacks of leasing is that you can’t just carry the minimum 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

There are some states that require as little as $12,500 for bodily injury liability and $5,000 in property damage liability. However, most leasing companies will require more. It is not unheard of for them to set their requirements at $100,000 per person for bodily injury claims and $50,000 for property damage.

What does full coverage auto insurance mean?

What type of insurance do you need for a lease? What are the coverages you need to make sure you have?

The state might only require a minimal amount of liability coverage, but lessors typically require higher liability limits in addition to physical damage coverage. Every company sets its rules, but it’s your duty to maintain insurance that meets the company’s standards at all times.

When you’re buying a leased vehicle auto 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.

This table shows you the average annual price difference between full or high coverage and lesser coverages.

Average Annual Auto Insurance Rates By Coverage Type
CompaniesAverage Annual Rates for High CoverageAverage Annual Rates for Low CoverageAverage Annual Rates for Medium Coverage
American Family$3,416.40$3,368.49$3,544.37
State Farm$3,454.80$3,055.40$3,269.80
Liberty Mutual$6,356.04$5,805.75$6,058.57
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What happens if you don’t have full coverage on a leased car? Full coverage auto insurance is almost always required on leased vehicles. If you do not carry the required amount of insurance, the company can end your lease and make you return the car.

What do comprehensive and collision benefits pay for?

Comprehensive and collision are forms of physical damage coverage that cover your car.

Liability insurance covers the other driver’s medical expenses and car repairs if you are found to be the at-fault driver. Collision insurance covers your medical expenses and car repairs in the event you are in an accident, and the accident is deemed to be your fault.

The Insurance Information Institute notes that 12 states plus Puerto Rico have no-fault insurance laws.

If the accident is deemed to be the other driver’s fault, their liability insurance covers your accident-related expenses.

Comprehensive auto insurance pays for damage to your car that was not caused by a car accident. Typical items covered by comprehensive insurance include certain types of weather damage, objects falling on your car, and theft.

Check out this video for more information on comprehensive coverage.

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

Carrying both comprehensive and collision is required under your lease because the company still owns the car and has a financial interest in it. Most experts call this full coverage.

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What is GAP insurance?

GAP stands for Guaranteed Auto Protection. It is an additional form of protection that covers depreciation when you’re filing an auto insurance claim.

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

So is it worth getting GAP insurance on a leased car?

GAP coverage is required because even for brand new vehicles, their value declines fairly quickly. This means, if you were to get into an accident at any point after driving it off the sales lot, your comprehensive and collision coverage would likely not cover the full amount owed on the vehicle.

GAP insurance covers the gap between what you still owe on your lease and the current market value of your car at the time of the collision.

For example, if you get into an accident and your leased vehicle is considered a total loss, your insurance company will determine what your car was worth just prior to the accident.

If the insurance company determines your car was worth $10,000 at the time of the accident, and you still owed $13,000 on your lease, you’d be responsible for paying $3,000 to the car dealer plus your deductible if you do not have GAP insurance.

If you do have GAP insurance, your GAP coverage pays any remaining money between your car’s worth and your lease payoff amount.

You may have to shop around to find a company that offers GAP, but once you do you will find that the added protection is very affordable. Some credit unions also offer GAP.

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Auto Insurance and Leased Vehicles

While it is vital to pay attention to your state laws and lease agreement requirements, people leasing a vehicle should evaluate their coverage amounts to make sure they are appropriately covered, yet not paying too much in auto insurance rates.

The bottom line is that people who are leasing the vehicle will need to be sure they are purchasing the legally and contractually required insurance types and amounts.

Are the state insurance requirements the same as the requirements through the lessor?

You’re required by law to purchase insurance on any vehicle that you own. It doesn’t matter if you’re leasing the car, financing the vehicle, or buying the vehicle outright when it comes to mandatory insurance laws.

While some of the required coverage options are the same, the coverage required by the state, noted here by, is very different than what’s required by your leasing company.

The laws that are drafted by state officials say that drivers must carry liability insurance to pay for the damages that they cause behind the wheel.

There are no state laws that say that drivers must protect their cars under their auto insurance policies. Unlike the state, leasing companies have an insurable interest in the car that’s being driven.

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How much more is insurance for a leased car vs bought car?

One of the main reasons why someone with a leased car pays more for insurance than someone with a financed car is because of the auto insurance requirements.

Leasing companies are much more strict than finance companies when it comes to insurance limits.

The liability limits that you must carry are much higher than the limits that you’re legally obligated to carry. This difference will drive up your rates.

The only way to bring them down is to raise your physical damage deductibles. Unfortunately, with most leasing companies, high deductibles aren’t an option.

If you are planning on leasing a car, it’s important to price the cost of insurance first. Insurance is something that you must buy and maintain, so you need to budget accordingly.

What are additional leased auto insurance coverage options?

In addition to full coverage insurance and GAP insurance, you may want to consider additional coverage options to make sure you have enough insurance coverage on your leased vehicle.

Other types of auto insurance coverage that may be mandatory in your state or wise to consider include:

  • Bodily Injury Liability – Most states make this type of coverage a legal requirement of all drivers. In the event that you cause an accident and someone else is hurt or killed, this coverage is extremely valuable
  • Property Damage Liability – This coverage is for situations where you are again at fault, but damage or ruin the property of someone else. In most cases, it is a vehicle, but it could also be utility poles, trees, or garage doors. It is also mandated in most states
  • Uninsured/Underinsured Motorist – If you are hit by a driver who does not have auto insurance or is not adequately covered, this coverage is essential, which is why many states require it of their drivers. You are allowed to purchase more than the required amount, however, many drivers elect to purchase greater amounts of collision and comprehensive coverage instead
  • Medical Payments – If you or one of your passengers are injured in an accident and need medical care, it will be covered under the medical payments coverage part of your auto insurance policy. This coverage is accessible no matter who is at fault for the accident and some states may legally require it

Be sure to shop around and compare leased vehicle insurance rates from many companies.

No matter what coverages you choose, you need to get multiple quotes to make sure you are getting the best deal. Compare quotes today on coverage for your leased car.

Frequently Asked Questions: Auto Insurance for a Leased Car

Here are a few more questions you may have. Let’s try to answer them.

Can you cancel insurance on a leased car?

You must carry full coverage on your leased vehicle. The only way you can cancel your insurance on a leased car is if you immediately replace it with a new policy.

How much should you put down on a car lease?

The average recommended down-payment on a leased vehicle is 20 percent of the purchase price.

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