Insuring a Leased Vehicle: Complete Guide to Requirements, Costs & Best Rates 2025

If you're leasing a car, you might wonder who handles the insurance bill. The lessee (person leasing the car) pays for insurance on a leased car, even though the leasing company owns the vehicle. You're responsible for all insurance costs and requirements. This includes monthly premiums, deductibles when filing claims, meeting coverage requirements set by the lessor, and maintaining continuous coverage throughout the lease term.

The leasing company sets minimum coverage requirements ($100,000/$300,000/$50,000 is common), gets listed as additional insured on your policy, and receives claim payments directly for vehicle damage. They can also purchase force-placed insurance if you don't maintain coverage. The leasing company will be named as the loss payee on your policy, meaning insurance payments for vehicle damage go directly to them, not you.

If you're worried about higher insurance costs for leased vehicles, your concern is justified. Yes, insurance for leased cars costs much more than owned vehicles, but understanding why helps you budget effectively. The average cost of full coverage car insurance is $1,895 per year among companies MoneyGeek surveyed, while insurance that meets state requirements costs $959 — an annual difference of $936. Learn more about average car insurance costs to understand typical pricing.

Several factors drive up leased vehicle insurance costs:

Figuring out insurance requirements for a leased car can feel overwhelming with different rules from your state and leasing company. Your car insurance needs depend on where you live and your leaseholder's insurance requirements, but here's exactly what you need to know. Nearly all states require minimum car insurance, whether for owned, leased or financed cars. Some states also require additional coverages, such as uninsured and underinsured motorist coverage and personal injury protection.

Beyond state minimums, your lessor will require full coverage car insurance and often gap insurance.

Most leasing companies require liability coverage of $100,000/$300,000/$50,000 (much higher than state minimums), plus comprehensive and collision coverage for financial protection against theft, vandalism, weather and accident damage. Deductibles are typically capped at $500-$1,000, preventing you from choosing higher deductibles to save money. Gap insurance is often mandatory to cover the depreciation gap between your car's value and remaining lease balance.

Insurance isn't included with leased or financed cars — you must arrange it yourself. If you don’t have coverage or if your coverage is insufficient, the leaseholder may purchase force-placed insurance for you. This is typically more expensive, so it's best to secure your own coverage to avoid extra costs.

Gap insurance might sound like another unnecessary expense, but it's actually crucial financial protection for leased vehicles. Lessors often require gap insurance to cover the depreciation of a new car once it leaves the dealership, and here's why it matters for your wallet. This insurance covers the gap between the car's value and what you owe on the lease, which is crucial if the car is totaled or stolen. Without it, you may still owe lease payments on a car you can't use.

Gap insurance must be purchased within 30 days of lease start when buying from your auto insurer. After this window, you'll need to purchase through the dealership at much higher cost.

Imagine you owe $25,000 on a lease. If the car is totaled, your regular insurance pays $20,000, but you owe $5,000 more. Gap insurance covers that $5,000, so you don't have to pay it out of pocket.

Understanding the differences between insuring a leased versus owned vehicle helps you budget accurately and avoid surprises.

Most states require only basic liability coverage, but lessors demand much more:

Your credit score greatly impacts leased car insurance costs, with poor credit potentially doubling your premiums.

States That Restrict Credit-Based Pricing: 

California, Hawaii, Massachusetts, and Michigan prohibit or restrict the use of credit scores in insurance pricing, so rates in these states may be more uniform across credit ranges.

Insuring a leased car is often more expensive than insuring a purchased one due to higher coverage levels, higher policy limits and low maximum deductibles. Leaseholders typically require higher coverage and policy limits than state laws, including comprehensive and collision insurance, which increases premiums compared to basic coverage for an owned vehicle. A low maximum deductible in your lease agreement can also raise your rates.

The average cost of car insurance with comprehensive and collision coverage is $1,895 per year, while insurance that meets state requirements costs $959 — an annual difference of $936.

The cheapest car insurance companies for leased cars among those MoneyGeek surveyed are GEICO ($102 per month or $1,223 per year) and Travelers ($108 per month or $1,298 per year). Use the table below to compare rates from various providers.

To avoid high insurance costs, research the insurance rates for the car model you're considering leasing before finalizing the lease. Factor in these premiums, along with the lease payments, to understand the total cost. Comparing quotes from multiple companies can help you get an accurate estimate. Use MoneyGeek's calculator below for quick, personalized quotes.

Understanding how claims work for leased vehicles helps you prepare for potential issues and ensures faster resolution.

Even if your lessor has strict insurance requirements, you can still find ways to lower your car insurance rates. Try these proven strategies to help reduce your premiums:

Avoid these costly mistakes that create lease compliance issues and cost you money:

Both leased and owned cars require insurance, with state minimums typically including liability and possibly uninsured motorist coverage or personal injury protection. Leasing companies often add their own requirements, such as comprehensive and collision insurance, and may recommend gap insurance to cover any value discrepancies. This article outlines the steps and requirements to insure a leased car, helping you navigate the process and ensure proper coverage.

We answer some common questions about leased car insurance requirements to help you get started:

Leasing a car comes with specific insurance requirements that can catch you off guard if you're not prepared. Since you don't own the vehicle, the leasing company sets coverage standards that are usually higher than state minimums — and that affects your rates. We designed our research to show you realistic costs and help you budget for the insurance requirements that come with your lease agreement.

Our Data Collection Process

We gathered 1,904 quotes from six major insurance companies across 100 ZIP codes nationwide, using data from Quadrant Information Services and state insurance departments. This comprehensive approach captures real rate variations you'll encounter when shopping for coverage, since the same driver profile can see dramatically different prices between insurers.

Sample Driver Profile Details

Our analysis centers on a driver with a clean driving record who drives 12,000 miles annually in a Toyota Camry LE — a popular choice for lease agreements. We adjusted this baseline profile by location, coverage type, and coverage amount to reflect the diverse situations lease customers face across the country.

Coverage Specifications for Leased Vehicles

For full coverage policies (which most lease agreements require), we used these coverage limits: • $100,000 bodily injury liability per person • $300,000 bodily injury liability per accident • $100,000 property damage liability per accident • $1,000 deductible for both comprehensive and collision coverage

Why These Coverage Levels Matter

Most leasing companies require comprehensive and collision coverage with relatively low deductibles, plus liability limits that exceed state minimums. Our methodology reflects these real-world requirements rather than bare-minimum coverage that won't satisfy your lease agreement. Understanding these costs upfront helps you factor insurance into your total lease payment and avoid surprises when you sign your lease contract.