Insuring a Leased Vehicle: What You Need to Know

Jun 4, 2020 2 min read

There are a variety of reasons people choose to lease versus buy their vehicles. Whether their decisions are based on preferences or financially driven, the number of people who are leasing vehicles is growing. If you’re considering leasing and are weighing your options, don’t forget to think through auto insurance. There are a few differences when considering auto insurance for a vehicle you own versus one you lease. Learn what coverage is required when insuring a leased vehicle.

Auto Insurance Is Still Necessary

Even though you don’t own a leased vehicle, you still need auto insurance! In fact, your leasing company may require you to carry more coverage than is legally required because the company wants to protect its investment. The thing to remember is that getting insurance on a leased car is absolutely necessary.

State-required Liability Insurance

Car insurance requirements are different depending on your state of residence, but the most common types are body injury liability coverage, which helps cover the medical expenses of anyone other than the policy holder in the event of an accident, and property injury liability coverage, which covers damages to other people’s property in the event of an accident.

Common Lease Contract-required Insurance

Lessors typically require a higher level of insurance, including collision coverage, which pays for damage to your vehicle resulting from a collision, and comprehensive coverage, which pays for damage to your vehicle not caused by a collision (like theft or damage from falling objects).

Many lessors require that your insurance policy have higher liability limits than your state’s minimum.

When something serious happens (such as the car being stolen or totaled), insurance covers the cash value of the car, which may be less than what you still owe. Because of that, some leasing contracts include a requirement for gap insurance, which helps cover the difference between the value of the vehicle and the amount you still owe.

Less Common Factors to Consider

As you shop for insurance for a leased vehicle, consider whether you need additional liability coverage, either for your peace of mind or for your leasing contract. You may need uninsured and underinsured motorist coverage in case you are in an accident in which the person at fault doesn’t have insurance or doesn’t have enough coverage. Another form of insurance that may be required is personal injury protection, which covers medical expenses, lost income and funeral costs for you or your passengers.

Because you are required to return the vehicle in the same shape in which you drove it off the lot, you may be required to replace any parts with original equipment manufacturer (OEM) parts, which could be more expensive than non-OEM parts.

You may have to list your leasing company as an additional insured entity on your car insurance because technically they own the vehicle.

Do Your Research

You should always look into what your leasing insurance conditions may be before you purchase; you won’t be able to leave the lot without meeting the lessor’s auto insurance requirements. If you have questions or would like to speak with an agent about auto insurance at Farm Bureau, find an agent near you and connect. 

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.