If you lease a vehicle, you have to get car insurance for it – just like you do when you buy a vehicle. You may need to get more car insurance for a leased vehicle than you would for a vehicle you bought, though. This is because many leasing companies require you to get full-coverage car insurance, which includes collision and comprehensive coverages, rather than just the minimum amount of liability coverage state law requires.

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When you lease a car, is insurance included?

Car insurance is not included when you lease a vehicle. You have to buy it on your own.

After signing a lease, you need to buy at least the minimum amount of car insurance required by both your state and your lease agreement. You will not be able to legally drive your leased car until you meet these requirements.

To avoid delays in car insurance coverage after leasing a vehicle, your main options are:

  1. If you already have auto insurance for other vehicles, contact your agent and ask them to add the leased car to your policy. This is usually quicker than shopping around for a new policy or company. You may even qualify for a multi-vehicle discount this way.
  2. Apply for coverage before picking up your leased vehicle, and set the active date for when you drive the car for the first time.

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What insurance do you need for a leased car?

You usually need to buy full-coverage car insurance for a leased vehicle. This means you often need liability, collision and comprehensive car insurance coverages.

For liability car insurance, you need to have at least the minimum amount of coverage your state requires. These minimum amounts vary from state to state; however, all states except New Hampshire require drivers to carry some amount of liability insurance, which covers injuries and property damage you may cause.

Bodily injury liability: Covers medical expenses for drivers injured in an accident you caused. This includes hospital bills, lost wages and legal fees.

Property damage liability: Covers damage to another person's property after an at-fault accident.

Some states also require personal injury protection or uninsured/underinsured motorist coverage, but this is less common.

In addition to liability coverage, your leasing company will likely require you to carry collision and comprehensive car insurance coverage for the duration of your lease. They require this to protect their investment should a crash or other covered event damage or destroy the leased car.

Collision coverage: Covers damage to the leased car that is caused by a collision. This can include damage from colliding with another vehicle, a fence or even a tree.

Comprehensive coverage: Covers damage caused by non-collision events, like falling tree branches and ice or auto theft.

It's important to know that your leasing company may require higher liability limits than what your state mandates. Even if it doesn't, it's nearly always a good idea to increase your liability car insurance coverage beyond the legally required limits.

Few states have minimum liability requirements that fully cover the damage and medical bills often tied to serious accidents. If these costs surpass your policy limits, you may have to pay the rest out of pocket.

Is gap insurance required for a leased car?

While not required by any state, car leasing agreements do often require guaranteed asset protection, or "gap" insurance. Gap insurance protects you if your leased car is totaled and you still owe money on it.

If your leased vehicle is totaled, your auto insurance company will only provide a payout based on the car's actual cash value (ACV), or the car's value after depreciation. A car's cash value decreases after you drive it off the lot. If you total the car and don't have gap insurance, you can wind up owing thousands of dollars out of pocket to your lessor.

How gap insurance covers leased cars

Say you lease a new car for $30,000. Not long after, you get into an accident that totals the car, and your provider pays you $15,000 based on the vehicle's ACV. Even if you've already paid $5,000 on the lease, you'd still have to pay your leasing company $10,000. Gap insurance would cover the remaining $10,000.

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What is the cost of insurance for a leased car?

Most leasing companies require you to have full-coverage car insurance, which generally includes liability, collision and comprehensive coverages. Full-coverage car insurance costs $4,430 a year or $369 a month, on average. However, your leasing company may want you to carry higher liability limits than what your state requires. Whether your lessor needs you to carry a higher limit or you choose to increase it yourself, your overall rate will increase.

Your collision and comprehensive car insurance limits are usually based on the actual cash value of your vehicle. If you lease an expensive vehicle like a sports car, you can expect to pay a higher car insurance premium.

As for gap insurance, you might pay as little as $20 a year for it, though this depends on where you buy it. Auto dealerships also offer gap insurance, but usually charge $500 to $1,000 a year for it. The cost of gap insurance through a dealership may be included in your monthly car payment, or it could be required in a lump sum upfront.

It's recommended that you get gap insurance if your leased car is brand new, as new cars depreciate quickly in their first few years.

Other factors that can affect your final auto insurance rate are:

  • Your age
  • Where you live
  • Your driving record
  • Your insurance claim history
  • Your deductible

Is insuring a leased car more expensive?

Leasing a vehicle will not make your insurance rates more expensive than they would be if you bought the vehicle. Still, since most leased vehicles must carry more car insurance coverage than any state requires, the minimum cost to insure a leased vehicle is often higher than it is for a vehicle you buy and own.

How do you insure a leased vehicle?

You need to buy insurance for a leased car before you drive it off the lot. Here’s how to do that.

  • A good first step to getting coverage for your leased car is to ask the dealership about their required auto insurance limits.
  • Next, shop around and compare quotes from multiple companies to find the best combination of cost and policy offerings. 
  • Also, ask insurers about what car insurance discounts are available to you. Your lessor may control your maximum deductible, but you are free to take advantage of any discounts you can find.

In addition, your leasing company will require you to list them as an additional insured and loss payee on your car insurance policy. As a result, they will be notified of any changes made to your policy or policy status. They will also receive any claim payouts.

Once you finalize your car insurance purchase, your insurer will send you proof of car insurance coverage that you can share with the dealership — and finish leasing your car.


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