When a leased vehicle is a total loss, the insurance company determines its cash value and pays that amount to the lease company. Unless the individual leasing the vehicle has gap coverage, he is responsible for any difference in the amount insurance pays and the terms of the lease.
Most leases require the driver to document any damage to the vehicle in an accident. The lease company often specifies the repair shop. The shop determines the extent of the damage, cost to repair the vehicle and if it is able to repair the car so it is safe to drive again. The insurance company sometimes wants to see the damage before making a final determination of the loss. If the cost of the damage is more than the value of the vehicle, the insurance company declares it a total loss.
When an individual leases a car, the leaseholder retains ownership of the vehicle. The lease specifies that the individual leasing the automobile is responsible for maintenance, repairs and insurance. He is also responsible for paying the lease. Even if the lease includes a clause allowing the driver to buy the car at the end of the lease, until the fulfillment of the clause, the insurance company pays any losses to the lease company.