Leasing & Auto Insurance

Auto and insurance leasing can seem a confusing subject. After all, the car isn't technically yours. It's a long-term rental, more or less. Be that as it may, when you lease a car, you are fully responsible for that vehicle, just as much as if you owned it. In fact, many leasing companies require a leased vehicle to be returned in better condition than most private owners would expect for a similar car of similar age and mileage. So, with that in mind, choose auto insurance as you would with one you owned, but with the knowledge that you have to return it in very good condition.

What Car Dealerships and Lenders Require

It's brass tacks time: You simply must carry full comprehensive auto insurance. Because the leased vehicle doesn't belong to you, you must adhere to the owner's wishes; liability required by your state is not going to cut it. Comprehensive is a more than worthwhile expense. You should really think of it as an investment because when you lease a vehicle you are financially liable for: theft of the auto or its components, acts of vandalism, windshield cracks, chipped paint, animal strikes, and damage due to acts of God. Imagine getting in an accident that totals the vehicle. Without comprehensive auto insurance, you would have to replace that vehicle out of pocket!

GAP Auto Insurance

And on that score, there is another type of auto insurance you should consider if you lease a vehicle. Guaranteed Auto Protection or GAP auto insurance pays the driver the amount between what the driver still owes on a lease and what the auto insurance company has set as the Actual Cash Value (ACV) of the car in the event that the car is declared a total loss due to an auto accident or an act of God. GAP is a convenient acronym because it suggests that there is a financial gap between what you might owe and what an insurance company determines the vehicle is worth at the time it was totaled. Let's say that you owe $13,000 on that SUV, but because of falling values on that model, it's value is set at $9,000. If it were totaled or stolen, you'd owe the leasing company, lender, or dealership $4,000! Many leasing companies automatically include GAP insurance, but be sure to check. You wouldn't want to be caught in the gap should the unanticipated occur.

Coverage Levels

Again, because the vehicle you might lease isn't yours, even after all of those payments, the dealership, leasing company, or lender will require you to insure their vehicle at a very high level of protection. And again, this shouldn't be something you take on the chin, but rather be glad that you will be protected in the event of an accident or theft. Most auto leasing companies set the minimum levels of insurance coverage as follows - but you might even want to carry more:

• Liability coverage at $100,000 per person / $300,000 per occurrence ($1 million if you live in Canada).
• Property liability coverage at $50,000.
• Comprehensive and collision for actual value with no more than $500 deductible.

Protect Yourself with Auto Insurance on a Lease

Leasing vehicles are the right choice for many people, depending on their lifestyles and their income levels. If you determine leasing to be right for you, then do what you can up front to protect yourself by protecting the leasing company's vehicle. And in that light, consider carrying auto insurance coverage that will surpass the leasing company's minimum requirements. If the unthinkable happens, you will be very glad you did.