Insuring a Leased Car

July 19, 2023||inPersonal Insurance|auto insurance, auto lease, personal insurance

When leasing a car, purchasing auto insurance is obligatory. Collision and comprehensive coverage are mandated by both the auto dealer and the financing institution, ensuring protection for your investment.

You will need to buy these coverages in addition to the others that may be mandatory in your state, such as auto liability insurance.

  • Collision covers the damage to the car from an accident with another automobile or object.
  • Comprehensive coverage covers a loss caused by something other than a collision with another car or object, such as a fire, theft, or collision with a deer.
Insuring a Leased Car
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The leasing company may also require gap insurance. If you have an accident and your leased car is damaged beyond repair or “totaled,” there’s likely to be a difference between the amount you still owe the auto dealer and the check you’ll get from your insurance company. That’s because the insurance company’s check is based on the car’s actual cash value, which takes depreciation into account. The difference between the two amounts is known as the “gap.”

The cost of gap insurance is generally rolled into the lease payments on a leased car. You don’t buy a gap policy. Typically, the auto dealer buys a master policy from an insurance company to cover all the cars it leases and charges you for a “gap waiver.” If your leased car is totaled, you won’t have to pay the dealer the gap amount. Check with the auto dealer when leasing your car.

If you have an auto loan rather than a lease, you may want to buy gap insurance to protect yourself from coming up with the gap amount if your car is totaled before you’ve finished paying for it. Ask your insurance professional about gap insurance; it may not be available in some states.

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