Understanding Insurance Requirements for Leased Vehicles

Leasing a vehicle can be an appealing option for those who want to drive a new car every few years without committing to long-term ownership. But before you drive off the lot, it’s essential to understand the insurance obligations that come with a lease.

Do I Need to Insure a Leased Vehicle?

Auto insurance is not optional when leasing. Because the vehicle remains the property of the leasing company, they require specific insurance coverage to safeguard their investment. Driving without proper coverage could violate your lease agreement and potentially result in significant costs if an accident occurs. The lease contract typically outlines the required coverage levels, often exceeding state minimums.

What Types of Coverage Are Required for Leased Vehicles?

Common types of coverage leasing companies require include the following:

• Collision coverage may provide financial aid if you hit another car or object.
• Liability coverage may compensate for bodily injury and property damage caused to others. The required limits are usually higher than what’s mandated by state law.
• Gap insurance may cover the difference between what you owe on the lease and what the vehicle is worth if it’s totaled or stolen. Some leases include this in the agreement, but not all. It’s essential to check and, if needed, purchase coverage separately.

Understanding these requirements before signing your lease can help you budget more accurately. Speak with your insurance provider and leasing company to clarify precisely what’s needed so you’re fully prepared.

Learn More

If you need more information on insuring leased vehicles, contact Academy West Insurance today. Our agents can help assess your situation and provide affordable auto insurance options.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.