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Is Special Lease Insurance Required When You Lease a Car?

Updated March 31, 2025
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When you lease a car, you may be required to buy more auto insurance than the state minimum coverage.

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When my friend leased a car recently, she was surprised when the leasing company told her about all of the different kinds of auto insurance she had to buy. Since she knows I write about insurance all the time, she asked me why there were so many lease insurance requirements to meet.

There's actually a simple reason. You have to buy more auto insurance when you lease a car because you don't own the car — the leasing company does. That company wants to make sure they are protected and have enough insurance coverage so that they aren't going to lose money if something happens to the vehicle.

The type and amount of lease insurance you'll need to buy if you're leasing a car may vary, but common requirements include liability, collision, and comprehensive coverage alongside gap insurance and uninsured/underinsured motorist coverage.

What is lease insurance for your car?

When you lease a car, you don't buy a special kind of coverage called "lease insurance." Instead, you will work with a regular auto insurance company that offers coverage to people who buy or lease cars.

The key, however, is that there are specific kinds of coverage you have to buy from that insurance company. Some of these kinds of coverage, like liability insurance, must be purchased by everyone who has a car, regardless of whether they pay cash for it, finance it with a car loan, or lease it. However, other types of coverage, like gap insurance, are only required for leased and financed vehicles.

All of these different kinds of auto insurance coverage protect against different kinds of losses that can happen if something goes wrong like an auto accident, a tree falling on the car, or the car being stolen. Many are protections you would probably want to buy even if you weren't required to do so.

However, the key with lease insurance is that the leasing company gets to tell you both what kinds of coverage you must buy and how much because they own the car they're letting you drive, and they require you to protect their investment.

Insurance requirements for leased cars

Different leasing companies may set their own requirements. However, there are some common types of insurance that you're likely to be required to buy if you lease a vehicle.

  • Liability insurance: In almost every state, drivers are required by law to buy liability insurance. This pays the bills if you cause an accident that hurts someone else.
  • Collision coverage: This kind of insurance is optional for drivers who own their car outright, but loan and lease companies almost always require it. It pays for damage to your own vehicle if you become involved in an accident.
  • Comprehensive coverage: This is also optional for drivers who own their car but required for most leased and financed vehicles. It pays for damage to your own vehicle caused by something other than an accident. If the car is stolen, damaged by hail, or something else goes wrong besides an accident, this pays for repair or replacement.
  • Gap insurance: If a car is destroyed or declared a total loss, the insurance company only pays out the fair market value. In many cases, the fair market value of the vehicle is less than the amount of money you would owe the leasing company if something happened to the car. That's because the amount you're paying on a lease often doesn't cover the depreciation or the loss of value the car experiences when it's being driven. Gap insurance pays for the difference between what you get paid from your auto insurer after the car is stolen or declared a total loss and the amount you'd owe the leasing company.
  • Uninsured or underinsured motorist coverage: This pays for damage to your vehicle caused by another driver who should pay the bills but who has too little insurance coverage to cover all the losses. You'll want to make sure the policy limit is high enough to cover costs you're likely to incur in an accident.

Leasing companies may require that you buy all these kinds of coverage and meet minimum coverage requirements. For example, you might be required to buy at least $50,000 or $100,000 in uninsured or underinsured motorist coverage.

State insurance minimums for leased cars

When you are trying to figure out how much car insurance you need, you should first look at your state's laws and then consider the leasing company's requirements.

While it's important to make sure you have all the coverage the leasing company mandates, it's even more essential that you follow your state's minimum insurance requirements. Otherwise, you could face serious penalties, including sometimes being charged with a misdemeanor crime.

States do not have specific requirements for leased cars. Every state sets minimum insurance requirements that apply to all vehicles, regardless of whether they are financed, leased, or paid for in cash. Typically, most states require:

  • Bodily injury liability insurance: This is insurance that pays for injuries you cause others. States set minimum requirements, such as $25,000 per person and $50,000 per accident. The Department of Motor Vehicles where you live will provide information on state minimum coverage.
  • Property damage liability insurance: This pays for property damage you cause others. There are also state minimums like $10,000 or $15,000 per accident.

A small number of states also require that you buy personal injury protection (PIP coverage). This pays for your losses no matter who caused a crash if your injuries were minor. In states where PIP is required, you can't pursue a claim against another driver unless your injuries rise to a certain level of severity.

Finally, some states either require uninsured or underinsured motorist coverage or require you to decline it in writing if you decide you don't want this protection.

GAP insurance

Gap insurance is a very common requirement on a leased vehicle. This coverage is important because an insurer will not pay more than the fair market value (the amount the car is worth) at the time of a covered incident. Often, the amount you owe the leasing company would be more than that amount.

So, gap insurance would pay the difference between the total outstanding amount you owe and the amount the car is worth. If the car is worth, say, $25,000 at the time it's totaled or stolen but you owe $30,000 to the leasing company once the car is destroyed or gone for good, then your gap insurance would pay $5,000.

Some dealers and leasing companies include gap insurance in your purchase, and you pay for it as part of your lease payments. However, you should be able to opt to buy it through an auto insurer instead. This can sometimes be cheaper than sticking with the gap coverage from the leasing company or dealer.

If gap insurance is not required, you may still want to choose to buy it to protect yourself. If you don't have it and something happens to your car, you would personally be on the hook for the difference between the insurance payout and the amount you owe. This could mean you get stuck paying thousands of dollars out of pocket.

Companies that offer gap insurance

Many auto insurance companies offer gap insurance or the equivalent. These include the following:

Nationwide

Nationwide offers gap insurance in select states. You can purchase coverage if your vehicle is six years old or newer. Nationwide's gap insurance will pay the difference between the amount owed to the leasing company and the amount your insurer pays out if the car is stolen or totaled, but you'll still be required to cover the amount of your deductible.

Liberty Mutual

Liberty Mutual offers gap insurance but requires you to purchase it at the time you buy or lease the car and requires you to be the car's first owner. You will still have to pay the amount of your deductible if your car is totaled or stolen, and then your gap insurance coverage kicks in.

Progressive

Progressive offers loan/lease payoff coverage, which is similar to gap insurance coverage. However, Progressive limits the payoff amount to no more than 25% of the value of your vehicle with the specific amount of protection varying by state.

How much does it cost to insure a leased car?

The amount that it costs to insure a leased car varies depending on many factors, including:

  • The specific amount of insurance coverage you buy
  • How much the vehicle is worth
  • The vehicle's safety features and theft and accident risk
  • Which insurance company you buy coverage from

According to Insurify, average monthly costs vary between $108 and $269 to buy leased car insurance. That's based on prices from 10 major insurers, including USAA, which offers the cheapest coverage, and Farmers, which has the highest monthly average price.

To make sure you do not overpay for coverage, you should compare quotes from multiple insurance companies and shop around for the best rates.

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Leasing vs. financing

Leasing is just one of several possible ways to get a vehicle for an affordable monthly cost. You'll want to consider both leasing and financing when you decide what makes sense for you.

Financing involves taking out an auto loan to buy a car. You'll make monthly payments for a set time based on the amount you borrow and the interest rate that you're charged for the loan. At the end of the loan term, you will own the car free and clear. You can finance the vehicle through the dealer, or through a bank, credit union, or online lender.

Leasing is different. It essentially involves renting a car for a set time. You make monthly payments to use the car, but the car is not yours. At the end of the lease term, you can choose to buy the vehicle or you can turn in the car. Leasing generally costs less than financing each month, but you don't end up with the car at the end unless you buy it.

Leasing can be a good option if you use your vehicle for business as you can deduct the financing charges and depreciation that's included in your payments. However, there are limits on how many miles you can put on the leased car without paying extra, and you can't modify the car or make it your own without incurring extra charges.

Regardless of whether you finance or lease the car, though, you should make sure you have the right insurance coverage in place to avoid having to pay a lot of money if something happens to the car when it's not officially yours.

FAQs

Is it more expensive to insure a leased car?

Because you are often required to buy extra types of insurance coverage when you lease a car, including gap insurance, collision coverage, and comprehensive coverage, it can be more expensive to insure a leased car than to insure a vehicle you own. This is only because of the extra coverages, not because a leased car itself inherently costs more to insure.

What kind of insurance do you need for a leased car?

You will need to buy your state's minimum liability coverage for a leased car, just as a driver does for any vehicle. You also need to purchase additional types of insurance coverage as required by the leasing company. This usually includes collision insurance, comprehensive insurance, uninsured and underinsured motorist coverage, and gap insurance.

What is the biggest downside to leasing a car?

There are many downsides to leasing a car, including the fact that you are limited in the miles you can drive and you do not end up owning the vehicle at the end of your lease term (unless you pay to buy the car).

Bottom line

If you have leased a car, you need to make sure you have the right insurance coverage in place. Shop around to find the best car insurance companies offering lease insurance that your leasing company requires so you can protect your investment in the vehicle and keep your assets safe if something goes wrong.

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