Leased Car Auto Insurance

You will definitely need to insure any car you lease with your own policy. In fact, the car dealership or any financial institution will require you to buy both comprehensive and collision coverage in addition to other mandatory types of coverage.

  • Collision coverage insures your vehicle from damage arising from collision with other vehicles, immovable objects, and often road hazards such as potholes.
  • Comprehensive coverage, as the name suggests, is all-inclusive covering pretty much everything that can happen to your vehicle, other than an accident.

You may also be required to purchase GAP coverage.

Guaranteed Auto Protection or GAP insurance or loan/lease payoff coverage is essentially insurance that protects you from depreciation if your car is wrecked or totaled before you can pay off the loan. Since new vehicles depreciate dramatically in the first year you own one, if you are involved in an accident and your vehicle is damaged beyond repair (totaled) your insurance policy will only pay for the actual cash value (ACV) of the car. GAP insurance plugs this hole and may even cover your deductible as well.

When you lease a vehicle, GAP coverage is typically included in the lease payments. The car dealer usually purchases a GAP policy to cover all its cars and charges you a GAP waiver, which means if you total the car, you won't have to pay the dealer for the gap amount.

You can also purchase GAP coverage for an auto loan as well. Since cars depreciate rapidly in the first year, you could end up paying a sizable gap payment if your vehicle is totaled before it is paid off. GAP coverage is not available in all states.