If you’ve decided to lease a new vehicle, you’ll need to know about your lessor’s car lease insurance requirements. Reach out to the dealership or review your leasing agreement for exact details, but expect to need at least some of the coverages below.
Liability Insurance Coverage
In most states, whether you’re financing a vehicle, entering a car lease agreement, or paying up front, you’ll need to purchase liability auto insurance. A liability insurance policy has different minimum coverage requirements based on where you live, but the main idea is that liability insurance covers expenses if you cause an accident.
Here’s what you’ll receive when you buy liability coverage:
- Bodily injury liability: This covers other people’s medical expenses when you’re at fault for an accident.
- Property damage liability: This covers damage to other people’s vehicles when you cause an accident.
While you’re choosing the best car insurance rates for your leased car, we recommend choosing a limit that exceeds what you’re willing to pay out of pocket. That way, you’ll avoid surprise upfront costs if you cause an accident.
Some states may also require you to pick up uninsured/underinsured motorist coverage. This type of insurance kicks in if you’re in a wreck with someone lacking sufficient liability coverage. Other states require personal injury protection (PIP), which pays for some of your medical bills after an accident.
Comprehensive And Collision Coverage
If you’re planning to lease a vehicle, the lessor will probably require additional insurance coverage to make sure that the car is fully protected. You’ll likely also need the following leased car insurance coverage:
- Collision car insurance: Collision coverage pays for repairs to your vehicle when you strike another vehicle or object with your car.
- Comprehensive car insurance: This covers damage to your car for most nonmoving situations. Vandalism, theft, and damage caused by natural disasters are usually included.
When you buy required car lease insurance coverage, you’ll have to name your lessor as a loss payee. This means that the insurance company will send payments to the lessor after a total loss accident.
Gap Insurance Coverage
Along with collision insurance and comprehensive insurance, some lessors may ask you to add gap insurance. “Gap” stands for “guaranteed asset protection,” and a policyholder would use it if a vehicle with outstanding payments got totaled or stolen.
In this situation, an insurer pays out the actual cash value (ACV) of the car at the time of the claim, minus your deductible. If the value of the car isn’t enough to cover the remaining balance on the car lease, gap insurance kicks in to handle the rest of the payout.
You may be paying for gap coverage without knowing it. Dealerships usually buy master policies from insurance providers to cover car leases, according to the Insurance Information Institute (III). If you’re seeing a “gap waiver” as part of your lease payments, it’s likely that the dealership already has gap insurance included in your lease.
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January 19, 2024 at 03:13AM
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Car Lease Insurance: Costs, Plans, And How To Buy - Quartz
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