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Leased Car – Insurance Info

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car leasingAlmost any state and country around the world requires a car to be insured if you want to drive it. This goes for leased vehicles, too. So, if you’re planning to lease a car, you’ll need to buy your own car insurance policy. A dealer or bank will require you to buy comprehensive and collision coverage, plus you’ll need to have any coverage that is mandatory in your own state or country, such as car liability insurance.  

In case your car becomes damaged from an accident with another vehicle or object, collision will cover it. In case of a theft, fire or collision with, for example, a deer cause a loss, comprehensive policy will cover it.

Sometimes leasing companies require something called “gap” insurance. In case of an accident which leaves your car “totaled” or damaged beyond repair, the chances are there would be a difference between the amount you owe to the dealer and the check the insurance company gives you. That difference is called the gap and it occurs because the insurance company bases the check on the actual cash value of the vehicle, while on the other hand leasing company values the vehicle without taking depreciation into account. However, if you lease the car, you won’t actually purchase a gap policy. Instead, the cost of this coverage will be rolled into your lease payments. Basically, the dealer purchases a master policy from some insurance company to cover all the vehicles it leases and charges their clients for a gap waiver. In other words, if your leased vehicle is totaled, there’s no need to pay the dealer the gap amount. However, you should check it with your auto dealer before signing a leasing contract.

Nevertheless, if your car isn’t leased, but you have a car loan, it’s wise to buy gap insurance in order to protect yourself from having to pay the gap amount in case your car becomes totaled before you finished paying for it. In some states and countries, gap insurance isn’t available, that’s why you should check everything with your insurance professional.

 

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