In a leased car transaction, two factors come into play. A consumer, while reaping the many benefits of a lease, must protect the finance company's investment at the same time. The leasing company also has a stake in protecting its own investment in the most extensive way possible, as it may be held responsible for any and all damages to the vehicle. These factors are easily accomplished by requiring the appropriate insurance coverages on the leased car.

Insurance Requirements

When leasing a car, a lessee, or the person leasing the car, is generally required to purchase more insurance coverage than would be required if the car was being purchased. During a purchase, most states only require minimal liability insurance to cover and protect the property. On the other hand, when you are leasing a car, full comprehensive coverage is often required. Full coverage usually requires $100,000 per person and $300,000 per accident for bodily injury, $50,000 worth of liability insurance for property damage and coverages to pay for losses due to fire, theft, vandalism, civil riot and collisions with animals. Accordingly, these coverages are usually required by leasing companies in order to protect their interest in the car.

The Gap Insurance Option

In addition to requiring full coverage insurance, it is often best for consumers to purchase gap insurance to protect themselves as well as the finance company. Accordingly, leasing companies often require the purchase of gap insurance. Gap insurance comes into play when a customer has an accident and finds he still owes money to the lien holder after receiving the value of the wrecked car. In this situation, the gap insurance pays the remaining lease bill and allows the customer to have a clean slate. Once in this position, the customer may start with a new lease or walk away from the deal completely. Even if a finance company does not require gap insurance, consumers often purchase this type of insurance to achieve the additional protections.

Shared interest

Having full coverage and gap insurance helps consumers and leasing companies achieve a common goal. The customer enjoys the benefits of a lease and can rest assured that in the event of an accident, he will not be stuck with a lease payment on a car he no longer drives. Additionally, the leasing company can be assured that its investment is fully protected and it won't be left holding the bag in the event that its customer wrecks the vehicle.

Source:

Car Insurance Needs for Leased Vehicles

Car Insurance Coverage for Leased Vehicles

Little-Known But Important Car Insurance Issues

Resource:

Cost of Insuring Your Leased Vehicle