Guide To Leased Car Insurance

You’re required to have car insurance coverage on your leased vehicle at all times. Both your state and leasing company will have minimum coverage requirements you must meet.

Since the leasing company technically owns your car, you’re also required to list them as the “additional insured” and “loss payee” on your insurance policy, so any paid out claims will go to them.

State Requirements for Leased Car Insurance

Whether you own, lease or finance your vehicle, nearly all states require drivers to carry a minimum level of car insurance. While specific requirements vary across states, there are several standard coverages you may need to meet the legal minimum required car insurance in your state.

• Bodily injury liability coverage: Bodily liability insurance covers medical expenses, lost wages, pain and suffering, legal fees and funeral costs for others if you cause an accident. It’s required in most states.
• Property damage liability coverage: If you’re at fault for an accident, property damage liability insurance covers damage to someone else’s vehicle or property. It’s required in most states.
• Uninsured and underinsured motorist coverage: This helps pay for damage to your vehicle and for you and your passengers’ medical bills if injured in an accident caused by a driver with no car insurance or insufficient car insurance. Underinsured and uninsured motorist coverage is required in some states.
• Personal injury protection: PIP covers medical expenses for you and passengers, regardless of fault. It may also include lost wages. PIP insurance is required in no-fault states, as well as a few at-fault states.
• Medical payments coverage: This helps pay for medical expenses for you and your passengers if you’re injured in an accident, regardless of fault.

Check state laws for minimum liability, UM/UIM and PIP requirements. Choosing higher limits than your state’s minimums may be wise, depending on your financial situation.

Insurance Requirements by the Leasing Company

In addition to state minimums, your leasing company may have other car insurance coverage minimums you need to meet. For example, you might be required to have at least $100,000 in per-person bodily injury liability limits, $300,000 per accident and $50,000 in property damage liability coverage, even if your state requirement is lower.

Most leasing companies will require you to purchase these types of physical damage coverage:

• Collision coverage: This covers damage to your leased vehicle if it’s involved in an accident, whether it’s a single-vehicle accident or a collision with another car. Collision car insurance pays to repair or replace your vehicle, up to its actual cash value, regardless of fault. It includes a deductible, which is the amount taken from your claims check.
• Comprehensive coverage: Comprehensive coverage is for non-collision damage, such as theft, vandalism, fire, hail, floods, falling objects, accidents with animals and more. These are unexpected events outside of your control. Comprehensive car insurance also pays out up to the actual cash value of your car and includes a deductible.

Leasing company	Leased car insurance requirements
General Motors (GM)	Varies by lease agreement.
Honda	$100,000/$300,000 bodily injury liability limits, $50,000 property damage liability, collision and comprehensive coverage with a maximum $1,000 deductible.
Kia	Varies by policy.
Lexus	Same minimum as your state, plus collision and comprehensive with a maximum $1,000 deductible.
Mercedes-Benz	$100,000/$300,000 bodily injury liability limits, $50,000 property damage liability, collision and comprehensive coverage with a maximum $2,500 deductible.
Nissan	$100,000/$300,000 bodily injury liability limits, $50,000 property damage liability, collision and comprehensive coverage with a maximum $1,000 deductible.
Toyota	Same minimum as your state, plus collision and comprehensive coverage with a maximum $1,000 deductible.

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Some dealerships automatically include gap insurance in your monthly lease payment, so you may be paying for it without even realizing it. Others will mandate you purchase a separate gap policy.

Gap coverage pays the difference between what your auto insurance pays if your leased car is totaled and what you still owe on the lease.

For example, if you have $20,000 left on your lease but your insurer only pays the actual cash value of $15,000 for your totaled $40,000 car, gap coverage will pay the $5,000 difference. This protects you from owing thousands to the leasing company for a car you no longer have.

Gap insurance is often worth getting on a leased vehicle since cars depreciate quickly. Review your lease carefully to see if gap coverage is included or required. If not, consider adding it to fully protect yourself in case of a total loss accident while leasing.

Insuring a leased car can be more expensive than insuring an owned vehicle because of the liability, comprehensive and collision coverage requirements imposed by most leasing companies. Often, these requirements exceed state minimums.

For example, the average annual cost of car insurance for full coverage—or a policy with liability, comprehensive and collision insurance—is around $2,150, based on Forbes Advisor’s analysis. State minimum insurance is 79% cheaper at $467 per year, on average. But state minimum coverage doesn’t include comprehensive and collision, and usually has lower liability limits than what’s required by care lease contracts.

Also, leasing companies often restrict deductible amounts to no more than $1,000 for comprehensive and collision, which can also increase rates. So while leasing doesn’t directly increase the average annual cost for full coverage car insurance, the extra coverage requirements can add several hundred dollars or more per year versus insuring an owned vehicle.

It’s important to note that if you financed a car, your lender would probably require you to buy full coverage car insurance. That means the cost of insurance could be close to what you would pay for a leased car with full coverage requirements.

While leased car insurance can be more expensive than insurance for a car you own, there are ways to lower your premiums:

• Bundle your policies. Insure your home or renters policy with the same company as your auto policy. Companies offer multi-policy discounts that can shave a decent chunk off premiums. The average auto and home insurance bundling discount is 14%, according to Forbes Advisor’s analysis.
• Raise your deductible. If allowed by your lease, raising your collision and comprehensive deductibles to $500 or $1,000 can reduce premiums. But ensure you have enough in savings to cover your deductible in an emergency. You can save between 7% and 28% a year on average by increasing your car insurance deductible, according to a Forbes Advisor assessment of car insurance deductibles and rates.
• Ask about discounts. See if you’re eligible for any car insurance discounts for being a safe driver, good student, completing a defensive driving course, having multiple cars on one policy, paying premiums in full or setting up automatic payments. Every discount can lead to savings.
• Maintain good credit. Insurance scores derived from your credit report are often used to set premiums. Keeping your credit in shape can help lower rates. When looking at car insurance rates in the 46 states that allow credit as a pricing factor, we found an average rate increase of 7% for drivers with poor credit.