What kind of insurance do you need for a leased car?

Leasing a car is an exciting way to drive a newer model vehicle without the long-term commitment of ownership. But before you hit the road in your new ride, it’s important to understand the insurance requirements that come with leasing. Let’s break down what you need to know so you can drive with confidence.

Is car insurance included in a lease?

Typically, car insurance is not included in a lease agreement, and you’ll need to purchase your own coverage before driving the car off the lot. Leasing companies require insurance to protect their investment and make sure their financial interests are covered if something happens to the car.

What coverage is required for a leased car?

Leasing companies usually require physical damage coverage that may combine insurance policies to help protect you and your car from a wide range of risks. Here’s what’s typically included:

Collision insurance

Collision coverage helps pay for repairs or replacement if your car is damaged in an accident, no matter who’s at fault. Whether you’re T-boned, rear-ended, or side-swiped — or you do the same to someone else’s vehicle — collision coverage helps cover the cost.

Comprehensive insurance

Comprehensive insurance steps in when your car is damaged by something other than a collision, including vandalism, hail damage, or hitting an animal. Comprehensive insurance, along with collision coverage, is also typically required for most financed vehicles.

Liability coverage

Liability coverage helps pay for injuries and property damage you cause to others if you’re found at fault in an accident. And if you’re taken to court, it may also assist with legal fees. Your leasing company and your state may set minimum requirements, but it’s wise to check with your insurance agent to make sure you have enough protection.

Underinsured and uninsured motorist coverage

These coverages help protect you if you’re in an accident with a driver who isn’t insured or adequately insured. Underinsured motorist coverage helps cover your costs after an accident if the other driver doesn’t have enough insurance, while uninsured motorist coverage kicks in if the other driver has no insurance at all.

Do leased cars need gap insurance?

A gap insurance plan, like American Family’s lease or loan assistance coverage, is designed to help pay the difference between your car’s current value and what you still owe on the lease if your vehicle is totaled in an accident. Since auto lease terms often run 60 months or longer and cars depreciate quickly, you could end up owing more than your car is worth after a total loss. With gap insurance, you’ll have peace of mind that you won’t be stuck paying for a car you can no longer drive.

Sometimes, gap insurance is included in the lease contract, so check your paperwork before purchasing additional coverage. You can get gap insurance through your dealership or leasing company, but it’s often more affordable through your auto insurance provider.

Ready to lease? Let’s get you covered.

Leasing a vehicle is a big step and making sure you’re properly insured is key to protecting your dreams. Connect with your American Family Insurance agent to set up an auto insurance policy tailored to your needs.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

This information represents only a brief description of coverages, is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Exclusions may apply to policies, endorsements, or riders. Coverage may vary by state and may be subject to change. Some products are not available in every state. Please read your policy and contact your agent for assistance.