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Car Insurance for Leased Cars

Reviewed by Rob Deming

Last updated: May 30, 2023

Car leasing is a popular option for people looking to upgrade their vehicles without the long-term commitment that comes with buying. Leasing usually comes with lower monthly payments than financing, and it allows you to drive a brand-new car every few years without the stress of selling your old car to make room for the new one.

While leasing may give you more freedom, you still need to make sure you’re getting the right car insurance for your lease. Here’s what you need to know about getting car insurance on a lease, including what types of insurance are required and how much it costs.

What does it cost to insure my vehicle?

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What insurance do I need for my leased car?

Most leasing companies require you to have full coverage car insurance for your leased vehicle. A full coverage car insurance policy usually includes the following coverages:

Liability coverage: Liability insurance applies when you cause an accident in your leased vehicle. It covers the other driver’s injuries and property damage, as well as your legal fees if you get sued.
Collision coverage: Collision coverage pays for your vehicle’s repairs when you cause an accident.
Comprehensive coverage: Comprehensive coverage covers the cost of damages to your leased car if it’s damaged by something other than a collision, such as theft, vandalism, or severe weather.
Uninsured/underinsured motorist coverage: Uninsured/underinsured motorist coverage (UM/UIM) covers your medical expenses and vehicle damages if you’re in an accident caused by someone who doesn’t have insurance or doesn’t have enough insurance to cover your losses.
Personal injury protection: Personal Injury Protection (PIP) covers the medical expenses of you and your passengers if you get injured in an accident, regardless of which driver was responsible.

Does a leased car need different insurance?

Think of your lease as renting the vehicle from the lender. Because you return the vehicle to the lender when the lease is up, you will sign an agreement that outlines the rules the lender has for your lease, including conditions such as a limit of the miles you put on the vehicle during the lease period, mandatory regular maintenance, and even insurance requirements.

If you’re considering leasing a car, it’s important to understand the insurance requirements. Drivers who lease their cars usually need to have a full coverage car insurance policy. A full coverage policy protects the vehicle against physical damage, which is less risky to the lender in case you get into an accident or the car gets stolen.

On the other hand, drivers who own their cars are typically only required to have a minimum coverage insurance policy. Minimum coverage insurance varies by state, but most states require liability coverage for property damage and bodily injury. Some states also require UM/UIM and PIP.

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Do I need gap insurance for my leased car?

Gap insurance covers the difference between the current value of your leased car and what you owe on the car if the vehicle gets totaled. For example, if your car is totaled or stolen and what you owe on the lease is greater than the car’s value, gap insurance for a leased car will pay the difference.

Gap insurance is often, but not always, required for a leased car. However, even if it’s not required, having gap insurance can give you peace of mind and financial protection for a relatively low cost in the event of an accident or theft.

Is it more expensive to insure a leased car?

Insurance premiums for a leased car can be more expensive than premiums for a car you own outright for two reasons:

Required coverage: while leasing companies often require a higher level of insurance coverage, owning your car only requires you to have a minimum coverage policy that costs less.
Age of vehicle: in general, new cars are more expensive to insure than older cars, and leased vehicles are typically (but not always) new models.

However, insurance premiums for the same vehicle at the same policy limits will be the same regardless of if the vehicle is leased or owned.

How much does car insurance cost for a leased car?

The cost of car insurance for a leased vehicle will vary depending on several factors, such as:

Your location
Your age
Your driving record
Your credit score
Your insurance claim history
The type of vehicle you’re leasing
Your deductible
The level of coverage you choose

While the cost is different for everyone, the average cost of full coverage car insurance in the U.S. is around $1,588 for all vehicle types. The average premium for medium-sized sedans is $1,694 and the average premium for medium-sized SUVs is $1,529.

One of the best ways to find an affordable insurance policy for your leased car is to get quotes from several insurance companies. Comparing rates can help you identify which company will give you the best coverage at the most affordable price.

Take our short quiz to see how much you can expect to pay to insure your leased car >

How much should I expect to pay to insure my leased car?

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Your rates will vary based on where you live, your age, and other factors like your driving record

How to get cheaper car insurance for your leased car

Car insurance premiums are personalized for each driver based on unique factors. However, there are some factors – like your age or traffic violations on your record – that you can’t change easily. But that doesn’t mean getting cheaper car insurance for your leased car isn’t possible. Here are a few ways to reduce your car insurance premiums:

Bundle your policies: Many insurance companies offer better rates when you purchase two or more policies, like home or renters insurance with your car insurance policy.
Improve your credit score: In most states, your credit score can impact the cost of your auto insurance policy. Drivers with good credit usually pay lower rates than drivers with bad credit.
Look for discounts: Most car insurance providers offer discounts that can reduce your premium. You can usually save money if you take a defensive driving course, insure a new vehicle, have no recent traffic violations or accidents, and pay your annual premium in full.
Choose high deductibles: Some car insurance policies require a deductible, like collision insurance. By choosing a higher deductible, you can get a lower premium.

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Frequently asked

Does car leasing include insurance?

Car leasing doesn’t include car insurance. Leasing companies will require you to have a separate car insurance policy to protect the vehicle, and this payment is separate from your monthly lease payments.

Who pays insurance on a leased car?

The lessee pays for the car insurance on a leased car. Additionally, a car leasing company will usually require you to maintain a full coverage policy throughout your lease term.

Do you need car insurance to lease a car?

Yes, car insurance is a requirement to lease a car. Auto insurance is a legal requirement in most states, whether you lease, own, or finance the vehicle. You won’t be able to lease a car without getting a car insurance policy first.