What About Car Insurance For Leased Cars?

Many people would prefer to drive a leased car for just two or three years before changing it out for a new one. For this reason, car insurance for leased cars is something these drivers must secure.

Car insurance for leased cars has some mandatory requirements in some form or the other in all states of the U.S. The driver is responsible for liability auto insurance. In fact, this kind of insurance is mandatory in many states. Please check the mandatory requirements for car insurance for leased cars in your state.

Collision and comprehensive insurance policies need to be bought for leased cars.

The car dealerships and finance companies require drivers to purchase collision coverage as well as comprehensive insurance when purchasing car insurance for leased cars. Comprehensive insurance for leased cars will protect lessees financially against theft, vandalism, and strikes by animals or natural calamities and disasters. Collision coverage is part of the car insurance for leased cars that saves the driver from paying damages when the driver and the car have been involved in the accident.

Car lenders and dealerships require that the car is fully insured since the driver doesn’t own the car. If the lessee don’t cover the car fully, in case of accidents, the car dealership is liable to pay for the damages.

Purchasing Gap Insurance

People who obtain car insurance for leased cars also purchase gap insurance. However, gap insurance isn’t part of comprehensive insurance. Gap insurance is the difference that the insurance company will pay when there is an accident and there is an outstanding payoff amount on the car. Cars depreciate by as much as 20-30% within the first 3 months after purchase. The outstanding payoff amount can be equal to the value of the car. If you have leased a new car that has cost $20,000, the value after 3 months would be $16,000 (considering 20% depreciation). This is the amount that the insurance company would pay. However the payoff amount would still be $20,000. The insurance company would also pay the difference of $4,000 if the driver had purchased gap insurance.

Usually gap insurance details are a part of car insurance for leased cars. The lessee is also charged a GAP insurance waiver. This enables the lessee to escape any responsibility in making a payment for the gap amount to the car dealership in case the car meets with total accident.

You will need to make payments on your leased vehicle even after an accident.

In cases of an accident, you have to continue to make payments on your car until the lien holder receives the money from the insurance company. If you ever stop, it’s quite possible that you could default on your lease. If this default happens, then you can be sure that there will be an ugly mark on your credit report. This could create problems in the future, when you wish to lease your second car or even purchase a new car.

Scrutinize The Car After Accidents

If the insurance company, from whom you have taken the car insurance for leased cars, decides to repair the car instead of totalling it, check that repairs have been done using OEM parts, the paint and tires match, and it’s in working condition as when you drove it from the dealership. In case parts or paints don’t match, you can be in for trouble with the car dealership from whom you bought the car.

Leased car insurance is something to be sure to get. Remember to secure collision, comprehensive, and gap insurance for your leased car to be fully protected from loss should damage happen to your vehicle.