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You need auto insurance for a leased car, just like a vehicle you own. The minimum car insurance requirements vary from state to state, but liability insurance is the most common required coverage. Many states also require uninsured and underinsured motorist coverage or personal injury protection (PIP) insurance.

Likewise, leasing companies have their own requirements for insurance coverage. For example, many require comprehensive and collision insurance for additional protection. They may also require gap insurance, which can pay the gap between the vehicle's depreciated value and the amount you still owe on your lease.

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What Are the Insurance Requirements for a Leased Car?

Depending on where you live, you’ll need to carry a car insurance policy with liability coverage for your leased vehicle. Some states also require additional coverages, like uninsured and underinsured motorist coverage and PIP insurance.

On top of state-mandated coverages, your lessor may also require you to purchase full coverage or gap insurance.

Insurance Requirements from Your Leaseholder

Leasing companies often have insurance requirements beyond state minimum coverages; since they own the vehicle you’re leasing, they want to make sure it’s financially protected in the event of an accident. Some common additional coverages that leasing companies require are comprehensive, collision and gap insurance.

Possible Additional Insurance Requirements When Leasing
Insurance Type
Coverage Description

Comprehensive Insurance

Comprehensive insurance helps pay for repair or replacement if your car is damaged in an incident other than an auto crash. This coverage is typically purchased with collision insurance as part of full coverage insurance.

Collision Insurance

Collision insurance covers the repair or replacement of the leased vehicle if it’s damaged after colliding with another car or object. The coverage is also typically part of full coverage insurance.

Gap Insurance

If your car is totaled in an accident or stolen, gap insurance may come in handy. This insurance covers the difference between the amount you owe on the leased vehicle and its actual value.

Is Gap Insurance Required When Leasing a Car?

Gap insurance may be optional as part of state minimum coverages, but many lessors require it since new vehicles tend to depreciate once driven off the dealer’s lot. This type of policy covers the difference between the value of the car and the amount you owe on it. If your leased vehicle is totaled in a collision or is stolen, gap insurance can help you pay off the remainder of your lease.

Does Leasing a Car Require Full Coverage Insurance?

While it isn’t necessary to purchase full coverage auto insurance for your leased car, it may be a good idea since this insurance type includes liability, comprehensive and collision insurance. Full coverage insurance provides financial protection against damages to your vehicle and occupants and the other party’s vehicle and passengers in the event of a collision.

Insurance Requirements According to State Law

When you lease a car, you’ll need to carry an insurance policy that meets the state minimum requirements, even though you don’t own the vehicle. Keep in mind that while minimum car insurance coverage rules vary by state, local requirements are the same whether you lease, finance or own your car.

Insurance Coverages That Are Typically Required by State Law
Insurance Type
Coverage Description

Liability Insurance

If you're at fault in a collision, liability insurance covers the driver of the other vehicle involved. The vast majority of states require liability insurance, including bodily injury and property coverage.

Uninsured and Underinsured Motorist Coverage

Some states also require you to carry an uninsured and underinsured motorist coverage policy. This insurance protects you if you’re in an accident caused by an uninsured driver, a driver whose coverage cannot cover your costs or a driver whose insurance company denies their claim.

Personal Injury Protection (PIP)

PIP insurance helps you pay for the medical expenses related to injuries you and your passengers sustained in a car accident. This coverage is required in some states and optional in others.

Almost all states require bodily injury liability and property damage liability insurance. If you are at fault in an accident, this will cover damage to the other party’s vehicle and medical bills. The average cost of liability-only insurance is $728 per year.

Twenty-two states require drivers to have uninsured and underinsured motorist coverage on their policies. This coverage can protect you if you are ever in an accident caused by an uninsured or underinsured driver. According to uninsured motorist statistics, there are 28 million drivers who don’t have car insurance in the U.S.

While it isn’t required in every state, PIP insurance can help cover your medical bills if you get into an accident. Moreover, it will protect you regardless of who caused the crash, unlike uninsured motorist coverage, which requires you to prove that the other driver was at fault.

Should I Purchase More Coverage Than Is Required?

The minimum lease insurance requirements may include liability insurance, uninsured and underinsured motorist coverage and PIP insurance, depending on your state’s coverage laws. However, since states only mandate low liability limits, your insurance needs may differ from what your lessor requires you to carry or the coverage you’d need to cover damages to your leased vehicle.

For instance, if you’re at fault in an accident and injure someone else, your liability coverage pays for their medical expenses. However, if you don’t have enough liability insurance to cover these costs, you’ll be forced to pay the remaining costs out of pocket.

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Keep in mind that aside from the state minimum car insurance requirements, you’ll need to purchase any additional coverage types that your lessor requires. These coverages may include comprehensive and collision insurance or gap insurance. Lessors may require these other coverages so that the leased vehicle is fully financially protected in the event of an accident.

Is It More Expensive to Insure a Leased Car Than a Purchased Car?

Leasing a car may be cheaper than buying it outright. However, that doesn’t necessarily mean that insurance coverage for that vehicle is more affordable. You may find that insurance is more expensive for leased cars since lessors often require high coverages and protections for their property. Typically, lessors require comprehensive and collision insurance for their vehicles.

According to average auto insurance costs, a comprehensive and collision insurance policy typically costs $1,311 per year, while liability-only insurance that meets the state requirements costs $898. That’s an annual difference of $413.

How Can I Decrease Insurance Costs for My Leased Car?

Even if your lessor is strict with its lease insurance requirements, you can still find ways to lower the cost of your policy. MoneyGeek gathered some key steps you can take to help lower your premiums:

1

Take advantage of discounts.

Car insurance discounts can make your coverage more affordable, so it’s beneficial to check for and take advantage of all available discounts a provider offers.

2

Consider bundling.

Usually, bundling your home and auto insurance policies with the same company can score you a significant discount.

3

Shop around.

Car insurance quotes vary depending on each driver’s characteristics; an affordable company for one driver may be expensive for another. Compare car insurance quotes from at least three providers to find the cheapest auto insurer for your unique driver profile.

Frequently Asked Questions About Leased Car Insurance

You need to buy an auto insurance policy for your leased vehicle, even though you don’t own it. MoneyGeek answered frequently asked questions about leased car insurance requirements to help you get started.

About Mark Fitzpatrick


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Mark Fitzpatrick is a senior content director at MoneyGeek with over five years of experience analyzing the insurance market, conducting original research and creating content that can be personalized for every buyer. He has been quoted on insurance topics in several publications, including CNBC, NBC News and Mashable.

Mark earned a master’s degree in Economics and International Relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his economics and insurance knowledge to bring transparency around financial topics and help others feel confident in their money moves.