What Type Of Insurance Should Your Leased Vehicle Have?
Leasing a vehicle is quite common as lease packages and pricing have become very competitive and attractive to those interested in owning a new car. Be sure to investigate the insurance requirements of your lease agreement, as there are very specific requirements under most contracts. And if you unknowingly don’t read a specific clause, it could cost you thousands of dollars when the lease expires.
Insurance To Protect You
Auto accidents can cause physical damage to your car and injuries to the people inside, but the financial ramifications of an auto accident can be very significant. These financial considerations are the reason that liability coverage is required by most states. Typically, a minimum of $25,000 per occurrence is required.
While it is important to maintain liability insurance in accordance with the law, it is also imperative that you purchase an adequate amount of coverage in order to protect your assets. It is possible that a single accident could cause injuries to others that might result in a very costly claim.
With medical costs constantly car reg check increasing, and jury verdicts on the rise, it is very important that you purchase insurance that will provide the right amount of protection for you.
Drivers who are underinsured run the risk that they would be held personally liable for a portion of a large jury verdict. And without enough protection, it could take years (or even decades) to satisfy a judgment.
So how much coverage do you need to have on a leased vehicle? Check your lease agreement, as there will be an insurance requirement with respect to the minimum requirements. While there may be requirements for any car by law, those amounts, as previously mentioned, are often quite low and offer very little protection.
Lease agreements typically have higher minimum requirements than state laws, but you should always purchase as much coverage as you can reasonably afford. Often $100,000 per person and $300,000 per occurrence is a standard amount that is needed to qualify for a lease.
Insurance to Protect Your Car
Liability insurance is only one facet of a personal auto policy that applies to your leased vehicle. You will also need to have physical damage coverage for your leased car. This will pay to repair or replace the car in the event of an accident. This includes collision and comprehensive benefits.
There is typically no stated value limit for this type of coverage. Instead, the policy will pay to repair or replace your existing car, subject to your deductible.
The deductible amount can be customized to your own comfort level. This amount can be as low as $100 or set much higher. Lease agreements will state the maximum deductible allowed, which is often $1,000.
Of course, choosing a higher deductible will result in a lower cost for your insurance. And although you take a higher out-of-pocket risk, it is still a popular option.
If your car is damaged to the extent that it becomes a total loss, the insurance company will pay only the book value, or market value of your car considering the wear and tear, and mileage of the vehicle. Often, this amount is lower than the balance of the lease agreement (or loan if you borrowed money and bought the car).
When this occurs, the leasing company will be paid the book value by your insurance company, and will then look to you to pay the difference. Additional coverage can be purchased to protect you from this exposure which is called Gap Insurance. This type of benefit can be purchased at the time you purchase/lease the vehicle. Most persons elect not to purchase this coverage.
Insurance To Protect the Leasing Company
Your policy provides protection to you and the lease company. Most auto lease agreements will require that your insurance policy list them as an additional insured. This provides liability protection to the leasing company.
They will also require that they be listed as a “loss payee” which means that any payments made by the insurer for repairs or replacement of the damaged car will have the leasing company listed on the check. Thus, if the repair cost was $5,000, you could not use the funds for something different and leave the vehicle unrepaired.