If you lease a car does it include insurance?

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Here's what you need to know...


Leasing a car is a convenient way to get a brand new car while still preserving your money. If you want a better car for less money, you’re the perfect candidate for a lease.

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.

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 premiums on a leased car to be higher than they would be on a financed car.

While some lessors do offer you the option to buy insurance through the company, it’s best to consider all of your options.

It’s never too early to start comparing car insurance rates now by using our FREE tool above!

Review Your Leasing Contract Closely Before You Sign Anything

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It’s important to review your contract closely before you sign on the dotted line. While the contract includes tons of different terms, definitions, and charges, one important section you should pay close attention to is the section about insurance.

While insurance isn’t included in the contract, some companies include an option to buy.

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.

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, what’s required by the state 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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What type of insurance is required by a lessor?

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.

Here are the common requirements:

  • Bodily Injury Liability
  • Property Damage Liability
  • Comprehensive
  • Collision

Are there special requirements for comprehensive and collision coverage?

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

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.

Carrying full coverage isn’t automatically enough to satisfy your lease contract. Many times, leasing companies want to be sure that you have enough money to cover your deductible if you file a claim.

That’s why the company might restrict you from carrying high deductibles. In most cases, you can only have deductibles up to $500.

What is GAP?

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

Leasing companies require GAP so that they don’t lose money if the vehicle that you’re leasing is totaled. GAP is something that’s not required by a finance company.

Do you need to buy GAP coverage on your own?

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GAP is required, but that doesn’t mean that you have to go out and buy it on your own. In most cases, GAP is the only form of insurance that’s included in your lease payments.

When leasing companies do this, they have more protection because they don’t have to worry about the coverage canceling.

If you review your contract, and GAP is not included, make sure to find an insurance company that offers this optional coverage in their personal auto policy.

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.

Why is auto insurance more expensive for leased cars?

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 premiums.

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.

The most effective way to do a price comparison is to use an online auto insurance quoting tool. After you’ve entered makes and models into the tool, you can see which one you can afford.

Start gathering insurance quotes now by entering your zip code in our FREE tool below!

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