Liability, comprehensive and collision insurance are typically required on leased cars to protect the lessor’s investment.
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Written by Daniel Robinson WriterDaniel Robinson is a writer based in Greenville, N.C. with expertise in auto insurance, loans, warranty options and more. Away from the keyboard, Daniel spends time with his wife and son, plays guitar and obsesses over the Beatles and Baltimore Orioles.
Edited by RaShawn Mitchner Senior EditorRaShawn Mitchner is a MarketWatch Guides team senior editor covering personal finance topics and insurance. She’s spent over a decade writing and editing articles about how to save money on travel, entertainment, household services and more.
In this article, we at the MarketWatch Guides team outline the requirements for insuring a leased car, including how much coverage you need, where to find it and how much it will cost. We also delve into the benefits of gap insurance and the best car insurance companies to consider for leased vehicles.
Key Takeaways
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The MarketWatch Guides Team is committed to providing reliable information to help you make the best decision possible about insuring your vehicle. Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. After 800 hours of research, the end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
If you lease a car, you must have car insurance for the leased vehicle. When you lease a vehicle, you’re buying the right to drive it for a certain amount of time — usually two to three years — before returning it to the dealership. The leasing company (or lessor) retains ownership of the vehicle throughout your lease.
Given their ownership stake, lessors and leasing companies require a driver to carry enough insurance to protect their investment. They also are the ones to receive any payout that results from a claim.
You must show proof of insurance before you take possession of a leased vehicle. How much coverage you need varies by state and by leasing company.
Most states require some form of liability coverage, regardless of whether your car is leased or not. This type of insurance covers:
Most states require coverage of at least $20,000 for property damage liability and $50,000 for bodily injury liability. The only states that don’t require liability coverage are New Hampshire and Virginia.
Most states require liability, but quite a few states also require uninsured/underinsured motorist coverage (UM/UIM) or personal injury protection (PIP), regardless of whether your car is leased or not. Here’s a breakdown of the three types of car insurance required in some states:
| Description | Where It’s Required | |
| Uninsured/underinsured motorist | UM/UIM bodily injury covers you and your passengers for medical bills, lost wages and pain and suffering if you’re in an accident with someone who doesn’t have any or enough insurance. This is required in the District of Columbia and 19 states. | In the District of Columbia and 19 states |
| Personal injury protection | PIP covers your medical expenses, regardless of who was at fault for an accident. In some states, it’s called “no fault” coverage. PIP covers things like ambulance bills, emergency room charges, follow-up medical visits, lost wages, prescriptions and transit to and from your appointments. | In the 12 “no-fault” states and Delaware and Oregon |
| Medical payments | Medical payments (MedPay) coverage helps pay for medical bills for you and passengers in your car if any of you get hurt in an accident. | In Maine |
In addition to the minimum coverage required by your state, your leasing company also may mandate that you carry comprehensive and collision coverage. The combination of these is also known as “full coverage.”
Along with full coverage, your leasing company may also require gap insurance, which covers any depreciation from the time you lease the car to the time it was damaged in an accident.
New cars depreciate quickly. According to the Insurance Information Institute, most vehicles lose 20% of their value within the first year. Gap coverage protects you if you’re “upside down” on a vehicle — meaning you owe a bank or finance company more money than the car is presently worth.
Here’s how gap coverage works:
Insurance companies don’t determine rates based on whether your car is leased or financed. If you lease a vehicle, however, your leasing company may require that you purchase full-coverage car insurance.
The national average cost of full coverage is $2,008 per year while the average cost for minimum coverage is $627 per year. While buying minimum coverage may seem like a better deal in the short term, you could end up paying far more out of pocket in the long run.
For instance, say that you decide to purchase only the minimum liability coverage required for a vehicle. Over a year, you might save as much as $1,318 compared to what you would pay for an auto insurance policy with comprehensive and collision coverage. Sounds good, right?
Now, imagine that you’re involved in a car accident. The damage done to your vehicle will cost $8,000 to repair. Because you don’t have collision insurance on your policy, your provider won’t pay for the claim. You, then, are responsible for the full $8,000. You may have saved money initially, but now you owe $6,905 more than you would have if you’d opted to purchase more protection.
Car insurance exists to protect you financially. When deciding how much you should buy, think about how much you could afford to pay following an accident. Unless you have a lot of extra money set aside for emergencies, it’s in your best interest to pay for full-coverage car insurance.
| Provider | Average Annual Cost of Minimum Coverage | Average Annual Cost of Full Coverage |
| USAA | $387 | $1,512 |
| Erie Insurance | $390 | $1,458 |
| Nationwide | $531 | $1,433 |
| Geico | $461 | $1,596 |
| Auto-Owners Insurance | $358 | $1,619 |
The following tactics can all help you save on auto insurance for leased cars.
Once you know how much insurance you need, you can start getting quotes from different carriers online. When comparing policies, keep variables like coverages, limits and deductibles the same for each quote. This ensures that you’ll get an accurate picture of how different options stack up.
You’ll need to have the following info on hand to get a quote for insurance for your leased vehicle.
| Vehicle Information | Driver Information |
| Any safety features or anti-theft devices Make, model and year Odometer reading Vehicle identification number (VIN) Where you usually store it | Any information that might qualify you for discounts, such as whether you’re in the military or have completed a safe driving course Driving history Driver’s name and date of birth Driver’s license number Social Security number |
Each state has minimum car insurance requirements on a leased car. You may also have additional requirements set by your leasing company.
When getting quotes online, you’ll need to input your ZIP code first. From there, the insurer will recommend coverage based on your specific state-minimum requirements. You’ll also indicate whether your vehicle is leased or financed to narrow down the options that meet your needs.
Ready to look for an insurer for your leased car? Here are our top two recommendations for great coverage at affordable prices.
