How does insurance on a leased car work?


Quick Answer

When insuring a leased car, the insurance is most likely mandatory and the limits might be higher. The owner is typically required to use original replacement parts only. It's good to have gap insurance when leasing a car in case the car is ever stolen or totaled.

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Full Answer

Insurance for a leased car is mandatory, since the car technically belongs to a bank. Drivers should check to see if there are any state minimums they need to meet or if the leasing company has additional requirements they have to meet. An insurance plan for a leased car might have to include collision and comprehensive coverage.

Most leasing companies require high liability insurance limits for drivers of leased vehicles. A driver might also need either a low deductible or, if the driver has a higher deductible, money set aside in a reserve as long as the car is being leased.

If a leased vehicle requires repairs due to damage that results in a collision or comprehensive claim, the leasing company may require that only original equipment manufacturer parts be used, which are often more expensive. Depending on the car lease insurance policy, an inexpensive option may be available to take care of the gap between the price of aftermarket parts and factory parts.

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