Car Lease Insurance: Costs, Plans, And How To Buy
Car lease insurance typically includes liability, comprehensive, and collision coverages and costs an average of $1,968 per year for most drivers.
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Key Points:
- Whether you buy or lease a car, you will still need to follow state-mandated minimum car insurance requirements.
- Lessors may require additional insurance, like collision, comprehensive, and gap insurance.
- We recommend providers Travelers and USSA for car lease insurance, but it’s important to shop and compare to find the best rates for you.
Whenever you lease a vehicle, there are minimum car lease insurance requirements you must satisfy before hitting the road. Luckily, the best auto insurance companies make it easy to meet the basic standards for car lease insurance.
After thoroughly reviewing industry leaders, we’ve determined the top car lease insurance providers across the country. We’ll explain minimum car insurance coverage requirements, average insurance costs, and the process to set up car lease insurance.
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Do I Need Car Lease Insurance?
When you lease a vehicle instead of buying one, you still need to follow the state-mandated minimum car insurance requirements. The amount of coverage varies from state to state, but you’ll almost always require some form of car lease insurance. Lessors often require collision and comprehensive coverage, and you may need gap insurance as well.
The person leasing a vehicle is typically responsible for purchasing car lease insurance. If you found a car and are considering a lease, it’s worth asking your leasing company how much car insurance you need.
Car Lease Insurance Coverage Plans
If you’ve decided to lease a new vehicle, you’ll need to know about your lessor’s car lease insurance requirements. Reach out to the dealership or review your leasing agreement for exact details, but expect to need at least some of the coverages below.
Liability Insurance Coverage
In most states, whether you’re financing a vehicle, entering a car lease agreement, or paying up front, you’ll need to purchase liability auto insurance. A liability insurance policy has different minimum coverage requirements based on where you live, but the main idea is that liability insurance covers expenses if you cause an accident.
Here’s what you’ll receive when you buy liability coverage:
- Bodily injury liability: This covers other people’s medical expenses when you’re at fault for an accident.
- Property damage liability: This covers damage to other people’s vehicles when you cause an accident.
While you’re choosing the best car insurance rates for your leased car, we recommend choosing a limit that exceeds what you’re willing to pay out of pocket. That way, you’ll avoid surprise upfront costs if you cause an accident.
Some states may also require you to pick up uninsured/underinsured motorist coverage. This type of insurance kicks in if you’re in a wreck with someone lacking sufficient liability coverage. Other states require personal injury protection (PIP), which pays for some of your medical bills after an accident.
Comprehensive And Collision Coverage
If you’re planning to lease a vehicle, the lessor will probably require additional insurance coverage to make sure that the car is fully protected. You’ll likely also need the following leased car insurance coverage:
- Collision car insurance: Collision coverage pays for repairs to your vehicle when you strike another vehicle or object with your car.
- Comprehensive car insurance: This covers damage to your car for most nonmoving situations. Vandalism, theft, and damage caused by natural disasters are usually included.
When you buy required car lease insurance coverage, you’ll have to name your lessor as a loss payee. This means that the insurance company will send payments to the lessor after a total loss accident.
Gap Insurance Coverage
Along with collision insurance and comprehensive insurance, some lessors may ask you to add gap insurance. “Gap” stands for “guaranteed asset protection,” and a policyholder would use it if a vehicle with outstanding payments got totaled or stolen.
In this situation, an insurer pays out the actual cash value (ACV) of the car at the time of the claim, minus your deductible. If the value of the car isn’t enough to cover the remaining balance on the car lease, gap insurance kicks in to handle the rest of the payout.
You may be paying for gap coverage without knowing it. Dealerships usually buy master policies from insurance providers to cover car leases, according to the Insurance Information Institute (III). If you’re seeing a “gap waiver” as part of your lease payments, it’s likely that the dealership already has gap insurance included in your lease.
Are Leased Cars More Expensive To Insure?
Insurance providers don’t consider whether a car is being leased when setting rates, but a lessor’s car lease insurance requirements may go beyond your state’s minimum coverage limits. For instance, the state you’re in may only require $25,000 in property damage liability, but a lessor may mandate having double those liability limits.
Buying full coverage car insurance in addition to liability insurance usually means you’ll pay a higher insurance premium overall. Newer cars are also more costly to insure since they have high ACVs during the first few years of ownership.
Another variable that can raise auto insurance rates is the size of your deductible. A car insurance deductible is the amount you pay up front before an auto insurance policy takes over the costs resulting from a claim. Higher deductibles lead to lower premiums since more of the cost is on the policyholder.
Other factors that impact the price of car lease insurance include:
- The car’s manufacturer, model, and mileage
- Your credit score
- Your driving record
- Any previous insurance claims history
Because of the extra standards often set by lessors, it’s likely that your car lease insurance will be more expensive than a policy for a car you own. This largely depends on the additional coverage requirements set by your lessor, though.
Car Lease Insurance Costs
In the chart below, you’ll find average full-coverage car insurance rates from top providers. We also included the national averages for both minimum and full coverage insurance to show how these providers compare:
| Insurance Provider | Average Monthly Rate | Average Annual Rate |
|---|---|---|
| National Average | $164 | $1,968 |
| State Farm | $140 | $1,680 |
| Travelers | $135 | $1,615 |
| Erie Insurance | $140 | $1,680 |
| USAA* | $123 | $1,476 |
| Progressive | $151 | $1,809 |
*USAA insurance coverage is only available to active or retired military members and their families.
These rates are based on quotes for an unmarried, 30-year-old male driver with a 2020 Honda CR-V, good credit, and a clean driving record. While our team’s picks for best insurance providers all fall below the national average of $1,968 per year for full coverage, you may receive higher or lower quotes based on several variables.
Factors That Affect Car Lease Insurance
When searching for car lease insurance, remember that providers use a variety of factors to determine the rates they offer drivers:
- Age: Age plays a significant role in how much a driver will pay for insurance. Young drivers can expect to pay two or three times what a 30-year-old driver may pay for full coverage.
- Vehicle make and model: Some vehicles have higher safety ratings, while others are statistically more likely to be stolen. Insurance providers use these factors to raise or lower coverage rates as needed.
- Vehicle usage: Some providers use your anticipated yearly mileage to calculate policy quotes. The more you drive, the more you’re at risk of an accident.
- Credit history: Many providers use a driver’s credit history to determine rates. However, California, Hawaii, Massachusetts, and Michigan don’t allow providers to use credit as a determining factor, and some providers–such as Cure Auto Insurance–elect not to use it as well.
- Driving record: Your driving record plays perhaps the most significant role in how much you’ll pay for car insurance. Drivers with one or more tickets, accidents, DUIs, or other violations can expect serious rate hikes.
- Marital status: Many companies offer discounts for drivers who are married. Massachusetts and Michigan don’t consider marital status when calculating rates.
- Gender: Men typically pay higher premiums due to being statistically more likely to be involved in a motor vehicle accident. California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania don’t factor gender into rates, however.
- Location: Insurance providers use location-based traffic information and follow state requirements when determining the minimum costs for various types of car insurance.
Though you’ll likely need full-coverage car insurance for your leased car, you can still save money on premiums by following a few steps:
How Do I Get Car Lease Insurance?
Signing a car lease typically entails making a commitment to a car for two to three years. That can be a huge financial decision, especially if you return the leased vehicle once the term is up.
Here are some things to keep in mind if you’re looking for the best rate on car lease insurance:
- Choose a vehicle that suits your needs.
- Get the auto insurance requirements from the leasing company in advance.
- See if gap insurance is included in your lease payments.
- Compare coverage from insurance providers and see what prices and plans work for you.
- Pick a policy and provide proof of insurance to your lessor.
By following the guidelines above, you should generally end up with reasonable car lease insurance rates.
Recommendations For Car Lease Insurance
If you’re looking for car lease insurance that best matches your needs, research providers and compare car insurance quotes. After reviewing all the major car insurance companies, our research team recommends getting quotes from Travelers or USAA.
Travelers: Best Coverage Options
As a provider with a strong selection of coverage options, Travelers has plenty of experience in meeting customers’ needs. The company boasts both an A++ rating from AM Best for financial strength and an A score from the Better Business Bureau (BBB).
Beyond having a strong industry reputation and broad coverage options, Travelers also offers affordable full-coverage car insurance rates. Our team found full-coverage car insurance from Travelers for $1,615 per year, around 18 percent less than the national average of $1,968 per year.
Check out our Travelers insurance review to learn more.
USAA: Best For Military Members
USAA offers auto insurance only to military members, veterans, and their families. While availability is limited to these groups, USAA is worth considering for those who are eligible because of its affordability and exceptional customer service.
Out of our top providers, USAA offers the lowest annual rates for adult drivers with good credit and a clean driving history. The company’s rates come in at $1,476 per year or 25 percent less than the national average of $1,968 per year.
Read our USAA car insurance review to learn more.
Should I Lease Or Finance A Car?
Even though both leasing and financing include making monthly payments to get behind the wheel of a new car, there are some major differences between the two methods.
Financing means making a down payment and paying a car loan off until you have full ownership of the car. Leasing a vehicle is similar to paying rent on an apartment. You agree to use the leased vehicle for a set amount of time and pay the leasing company however much your car depreciates over the period.
While leasing a vehicle is a somewhat straightforward process, there are some upsides and downsides to pursuing this option.
It’s usually a better idea to finance a car than to lease one. However, leasing can be a great way to get behind the wheel when you can’t afford to finance or purchase a vehicle.
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Car Lease Insurance: Our Take
Drivers will need, at minimum, liability car insurance coverage when leasing a vehicle. However, most lessors will require more than the state-mandated minimum coverage, meaning you’ll need to purchase full-coverage car insurance. This type of vehicle insurance covers damages to your vehicle and provides liability coverage for other persons or vehicles.
To get the best rates on full-coverage car insurance coverage, you’ll need to shop around and get quotes from several providers. If you’re looking for ways to lower your existing car lease insurance rates, consider seeing what other providers may offer, lowering your deductible if possible, or looking for ways to bundle policies. Ask your insurance agent for discounts available through your existing coverage program.
Car Lease Insurance: FAQ
Below are the most frequently asked questions about car lease insurance:
How much is insurance on a leased car?
Many lessors require full-coverage car insurance, and the national average for this type of coverage is around $1,968 per year or $164 per month. However, it’s difficult to determine exactly how much car lease insurance could cost for you. Factors that affect your premiums can include your driving record, vehicle make and model, and coverage plan.
Is insurance more expensive for leased cars?
Yes, insurance is typically more expensive for leased cars. This is because lessors often require more than a state’s minimum vehicle coverage.
Is insurance included with a leased car?
No, a car lease rarely covers insurance policies. Expect the cost of car lease insurance to come out of your pocket instead of from your lessor.
What insurance do I need for a leased car?
You’ll need whatever insurance coverage your lessor requires for a leased car. This amount varies depending on where you lease your vehicle from. However, lessors typically require drivers to get full-coverage car insurance, which provides additional protection.
What is the purpose of car lease insurance?
Car lease insurance helps financially protect both the driver and the lessor in the event of an accident. Most lessors require drivers to have more than the minimum insurance required by the state.
What is the difference between collision and comprehensive car insurance?
Collision car insurance pays for repairs to your vehicle when you strike another vehicle or object with your car. Comprehensive car insurance covers damage to your car for most nonmoving situations. Vandalism, theft, and damage caused by natural disasters are usually included.
How We Rate Auto Insurers
Our review team extensively researches auto insurance providers to deliver informed and unbiased assessments of leading companies. We evaluate several key rating factors that are important to consumers to determine which providers are the best in the industry:
- Reliability: It’s important that an auto insurer is able to meet its claims obligations. Companies with a strong financial strength rating from AM Best score best in this category. Established insurers with a long history of reliable service also receive positive marks.
- Availability: Insurance companies that offer wider availability to consumers in terms of state availability and few eligibility requirements are more likely to meet consumer needs.
- Coverage: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits like roadside assistance.
- Pricing: Cost can be difficult to compare between insurers because so many factors impact annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we look at insurance rate estimates generated by Quadrant Information Services, discount opportunities, and consumer reports.
- Service: We comb through customer reviews on sites like the Better Business Bureau (BBB) to learn about customer experiences. Insurers with a low volume of complaints score well in this area. We also consider the claims process, giving higher ratings to car insurance providers that offer a smooth experience.
- Technology: Providers with an online quote tool, easy-to-use claims app and a usage-based insurance app score best in this category.
*Data accurate at time of publication.
