Before driving any vehicle, even a leased one, you need to meet your state's minimum liability car insurance limits. However, if you're leasing a car, you will likely be required by your leasing agreement to have collision and comprehensive insurance.

In this article:

When you lease a car, is insurance included?

No, car insurance is not included when you lease a vehicle. After signing a lease, you need to obtain at least the amount of car insurance required by state law and your lease agreement. You will not be able to operate your car legally until you meet these requirements.

To avoid any delays in coverage after leasing your vehicle, you should consider two choices:

  1. If you already have an auto insurance plan for other vehicles, contact your existing insurance agent and request the leased car be added to your policy. This is usually quicker than insurance shopping with a new company. You may even qualify for a multi-vehicle discount.
  2. Sign up for coverage before picking up your leased vehicle, and set the active date for when you drive the car for the first time.

What insurance do you need for a leased car?

When you lease a car, you need to have at least the minimum limits of liability car insurance your state requires. These limits vary from state to state; however, all states except New Hampshire require drivers to carry liability insurance, which typically includes bodily injury and property damage liability. 

Bodily injury liability: Covers medical expenses for drivers injured in an accident you were found to be at fault for. This includes hospital bills, lost wages and legal fees.

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

Some states also require personal injury protection or uninsured/underinsured motorist coverage, but this is less common. Your auto insurance provider will inform you of the minimum required limits.

Your lessor usually wants you to carry collision and comprehensive car insurance for the duration of your lease. This is done in order to protect their investment in the event of a crash or other covered damage to the leased car. 

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

Comprehensive coverage: Covers damage caused by noncollision events, such as auto theft or falling tree branches and ice.

It's important to know that your lessor may require higher liability limits than what your state mandates. Even if your lessor doesn't, it's a good idea to increase your liability car insurance beyond the legally required limits. Few states have minimum limits that can fully cover the damages and medical costs that may occur due to a serious crash. If the damages or legal/medical bills surpass your limits, you are responsible for paying the rest out of pocket. 

Is gap insurance required for a leased car?

While not required by states, guaranteed asset protection, or "gap" insurance, is often a requirement in car leasing agreements. It protects you if your leased car is totaled and you still owe a balance on it. 

If your vehicle is totaled, your auto insurer 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. A while later, you get into a crash 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 lessor $10,000. Gap insurance would cover the remaining $10,000.

Compare insurance quotes for your leased car to find great rates.

What is the cost of insurance for a leased car?

Lessors usually require you to have liability, collision and comprehensive insurance, which together is often known as full coverage. Full-coverage car insurance costs $1,255 per year or $105 a month, on average. However, your lessor may want 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 the car. If you lease an expensive vehicle such as a sports car, you can expect to pay a higher car insurance premium.

In regards to gap insurance, you could pay only $20 a year for it, depending on the provider you choose. Auto dealerships also offer gap insurance, but it usually costs around $500 to $1,000 a year more. The cost of gap insurance through a dealership may be included in your monthly car payment, or it may be required in a lump sum upfront. It's recommended that you get gap insurance if the 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?

Just having a leased vehicle will not increase or make your insurance rates more expensive than a neighbor who owns their car. However, since a leased vehicle must meet additional insurance requirements beyond the minimum outlined by the state, the minimum cost to insure a leased vehicle is often higher than an owned one.

How do you insure a leased vehicle?

You will need to get insurance before you drive the leased car off the lot. Your dealership may sell gap insurance, but there's a good chance it won't be at your best price. 

A good first step is to ask the dealership about their required car insurance limits. Next, shop around and compare quotes from multiple providers to find the best combination of cost and policy offerings. Also, ask insurers about what car insurance discounts are available to you. While your lessor may control your maximum deductible, you are free to take advantage of any discounts you're eligible for.

Your lessor will require you to list them as an additional insured and loss payee on your auto insurance policy. This allows them to be notified of any changes made to your policy status and to receive claim payouts. Once you finalize your car insurance purchase, have your insurer send you proof of car insurance coverage for the dealership — and finish leasing your car.

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