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May 28, 2024

Auto Insurance and Leased Vehicles

Leasing a vehicle can be an attractive option for many drivers who prefer to drive newer models or avoid the long-term commitment of buying a car. However, leasing also comes with specific insurance requirements that are crucial to understand before you sign your lease agreement.

Man Inside Vehicle

Understanding the Insurance Requirements for Leased Vehicles

Leased vehicles often come with higher insurance requirements compared to purchased vehicles. This is because the leasing company or lessor retains ownership of the car and wants to ensure their asset is fully protected in case of an accident or other damage.

Your leasing company may require the following coverage:

  • Collision insurance may help cover damage to the leased vehicle resulting from a collision with another vehicle or object, regardless of who is at fault.
  • Comprehensive insurance may help protect against risks not caused by a collision, such as theft, vandalism, fire, natural disasters and hitting an animal.
  • Uninsured/underinsured motorist coverage may help pay for accident-related damages if the other driver doesn’t have insurance or doesn’t have enough insurance to cover the damage they cause.
  • Liability Insurance is mandatory in most states, and leased vehicles might require higher limits than the state minimum to cover any damage or injuries you may cause to others in an accident.
  • Gap Insurance is particularly important for leased vehicles. It may help cover the difference between what you owe on your lease and the vehicle’s current market value if it is totaled or stolen. This is crucial because new cars depreciate rapidly, and without gap insurance, you could owe significantly more than the car is worth if it’s destroyed early in your lease term.

Leasing companies require these enhanced insurance policies to protect their investment. They are ensuring that their vehicle will be repaired back to its original state before the accident or that any financial discrepancies will be settled if the car is a total loss.

Leased Vehicle Cost Implications

The increased insurance requirements for leased vehicles generally mean higher insurance premiums. Collision and comprehensive coverage and the higher liability limits required by many leasing companies can significantly raise your total insurance cost. However, these costs can be somewhat offset by shopping around for the best insurance rates and maintaining a good driving record to qualify for lower premiums.

Contact Us

Contact Cloverleaf Insurance in St. Peters, Missouri. Our agents can help you tailor car insurance for your leased vehicle to meet your needs and satisfy the lienholder’s requirements.

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.

Categories: Auto Insurance

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