Insuring Your Leased Vehicle-What You Need To Know

Leasing a vehicle isn’t for everybody. However, it might suit you if you intend to have the same car for a couple of years. While you’ll never own the car, you can forget about the maintenance cost and you’ll enjoy a cheaper monthly payment than if you had a loan on the vehicle.

Leasing is a good option if you wish to preserve your money. With low interests, it has become more economical than buying a car. Nevertheless, leasing has some restrictions, so you must understand what’s expected of you. Here’s what you should know if you’re contemplating this option.

How Leasing Works

If you purchase a vehicle, you pay for its cost and you become the owner. You could then take a loan to cover the expenses and pay the loan over many years. Here, the lender will own the vehicle until you pay the loan at which point you’ll receive the title.

Leasing, however; resembles renting. In return for borrowing the car, you agree to pay the difference between what the vehicle is worth today and it’s worth once you return it. Like buying, you’ll make monthly payments throughout the lease.

You have the choice to purchase the vehicle once the lease is up. You might end up owing more money when the lease is up if you return the car in a poor condition or if you surpassed the agreed-upon miles.

Insurance for Leased Vehicles

With a leased vehicle, you can’t purchase the minimum insurance needed by the law. Instead, the lease contract will comprise clauses that expect you to buy comprehensive and collision coverage on the vehicle. The reason behind this is that the leasing company wants to ensure they’ll receive full compensation for any vehicle damage or loss.

Purchasing the collision and comprehensive will also protect you and ensure you meet the contractual obligations in case of total loss or an accident. Typically, the leasing company will expect you to pay for higher limits and additional coverage.

In some states, you’ll require underinsured and uninsured motorist coverage, which gives coverage when somebody lacks sufficient coverage or doesn’t have insurance. In Florida, for instance, you need bodily injury coverage for $300,000 per accident, $100,000 per person, and $50,000 in property damage.

Things You Should Know When Insuring a Leased Vehicle

Coverage is compulsory

Before driving your new vehicle, ensure you have coverage. If you lack lease insurance for the new car, you’ll have to purchase it before leaving the leasing office or dealership. Most states need some minimum liability insurance and the leasing company might need more than what the state requires.

Comprehensive and Collision may be necessary

Besides the fundamental liability insurance required for leased vehicles, you might need comprehensive or collision coverage. Collision offers coverage in case the vehicle sustains damages in an accident while comprehensive covers car damage when it isn’t in a collision, for instance, it applies if someone steals the car.

The lessee might have particular prerequisites for the deductible for these kinds of insurance. You might need to purchase specific riders, which could make the insurance more costly. For instance, the lessee might need an OEM (original equipment manufacturer) rider, which implies a body shop or mechanic must use original manufacturer parts instead of generic ones when repairing the vehicle.

Gap Insurance can Offer Protection

Gap insurance offers additional protection along with your basic vehicle insurance for leased vehicles. If you experience theft or a totaled car in an accident, the optional coverage fills the gap between the outstanding amount on the car and the amount your insurer would pay for an ordinary comprehensive or collision claim.

You can Save on Insurance

You might be eligible for considerable discounts on vehicle insurance if you insure numerous cars with the same carrier or if you bundle your vehicle with homeowner’s insurance. You equally have an opportunity to save if you have a clean driving record or if your new car has an anti-theft device.

Final Thoughts

Although you don’t have ownership of a leased vehicle, you’re liable for returning it in a good condition without damage once the lease is up. With the appropriate insurance, you can protect the leased vehicle and ensure you don’t pay for damages from your pocket in an accident or theft arises.

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