Insurance Requirements for Leased Cars

Both leased and owned cars require insurance, with state minimums often including liability and possibly uninsured motorist coverage or personal injury protection. Leasing companies usually add their own requirements, such as comprehensive and collision insurance, and may also suggest gap insurance to cover any value discrepancies.

Lessees must purchase insurance for their leased car because it's not included. Not doing so could lead to penalties from the lessor or the imposition of force-placed insurance, which is often more expensive.

• Requirements for Insuring a Leased Car
• Cost of Insuring a Leased Car
• Saving on Leased Car Insurance
• FAQ: Leased Car Insurance

How much insurance you need depends on where you live and your leaseholder’s insurance requirements. Almost all states require drivers — whether owned, leased or financed — to carry liability car insurance. Some states also require additional coverages, like uninsured and underinsured motorist coverage and PIP insurance.

On top of state minimum car insurance requirements, your lessor may also require you to purchase full coverage car insurance and/or gap insurance.

Insurance isn't included with leased or financed cars — you must secure it on your own. If you don't, or if your coverage falls short, the leaseholder might opt for force-placed insurance on your behalf. This tends to be more expensive, so arrange your own coverage to avoid additional costs.

Lessors often require gap insurance to cover the depreciation of new cars once they leave the dealership. This insurance covers the gap between the car's worth and what you owe on the lease, especially important if the car is totaled or stolen. Without it, you might still owe lease payments on a car you can't use.

Gap insurance isn't available from all insurers, so you may need to shop around to find one that includes it with their comprehensive and collision coverage. It's a smart choice, particularly for higher-value leases. Options for payment include monthly or an upfront lump sum.

When insuring a leased car, include the leasing company on the policy. In case of a claim, the payment check is issued to both you and the leaseholder, requiring their endorsement to cash. Sometimes, the check must go directly to the leaseholder for repairs. Unlike with owned cars, any claim payout must be used solely for repairing the vehicle.

The cheapest car insurance companies for leased cars are:

• Travelers: $89 per month, $1,068 per year
• Nationwide: $90 per month, $1,084 per year

Insuring a leased car often costs more than insuring an owned one because leases typically require comprehensive and collision coverage, not just liability. Owners of cars can opt for liability-only insurance, which is less expensive.

To avoid high insurance costs, research the insurance rates for the car model you're considering leasing before finalizing the lease. Factor in these insurance premiums along with the lease payments to understand the full cost.

You need to buy an auto insurance policy for your leased vehicle, even though you don’t own it. MoneyGeek answered some common questions about leased car insurance requirements to help you get started.