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Insurance for Leased Cars – What Are Your Options?

Are you paying off a car loan or leasing the car? People often lease as a vehicle in order to pay a lower premium every month. If you are thinking of leasing, you will have a few options for auto insurance coverage.

The Leasing Experience

When you buy a car the company with whom you take out a loan officially owns the car until you pay it off.

With leasing, you’re basically renting the vehicle from the dealership. Your payment represents the difference between the current value of the car minus depreciation—it’s value when you return it to the dealership. The lease specifies the number of miles you can drive it, with the understanding you pay more if you go over that number.

When a vehicle’s lease is up, you can do one of two things:

  • Buy the car
  • You might owe more due to driving more than the agreed-upon mileage or returning the vehicle in poor condition.

Pros and Cons

Leasing comes with a set of pros and cons to keep in mind.


  • Less expensive – Monthly payments can be lower with a lease than they would for a loan.
  • Upgraded – A lease can let you have a new car that you might not otherwise afford.
  • Warranty – The car comes with a warranty for the life of the lease.
  • Purchase – If you want you can buy the car for the buyout price when the lease is up, with cash or a financed loan.


  • Depreciation – When you are paying every month to lease, when you get to the five-year mark, you’re basically paying for a car that’s about 60 percent of the original purchase price.
  • Early-return fees – You may have to pay fees if you need to return the car to the dealership before the lease is up.
  • More fees – You might have to pay fees if the car is damaged beyond normal wear and tear.

Insurance Coverage for Leased Vehicles

The company you’re leasing from will most likely require you to buy certain insurance products. Plus, states can also have their own minimum insurance requirements.

Some of the items you might have to pay for include:

  • Liability insurance, the same as you’d be required to purchase when you buy a car.
  • More coverage and higher limits. The leasing companies usually have you buy $100,000 in bodily injury liability coverage per pers, $300,00 per accident and $50,000 in property damage liability.
  • Your state may require you to have uninsured and underinsured driver coverage, in case you are in an accident with another motorist who isn’t properly insured, either carrying too little car insurance or none at all.
  • You might also be required to have personal injury protection (PIP) for medical costs, lost earnings and even funeral costs for you and your passengers when you’re in an accident.

Gap Insurance

Gap insurance is designed to be a supplement to your basic car insurance. If you have gap coverage and you get into an accident in a leased vehicle, or if it is stolen, the optional gap coverage is there for you to cover the difference between the lease amount still due and what the insurance company would cover a typical collision or comprehensive claim.

Insurance Reference Guides

Where you live may affect your coverage options. Our reference guide will assist you in findoing plans available in your state.

Insurance Terms Glossary

From "absolute liability" to "written premiums," we've done the work for you to define commonly used insurance terms.

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EInsure Services, Inc., Insurance Services, Chicago, IL

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