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Leasing instead of buying has advantages, including more affordable monthly payments and the ability to upgrade your car more often. While it isn’t right for everyone — especially if you drive a lot of miles — leasing can be a good alternative to buying.

One of the questions that’s bound to come up when you’re leasing a car is how you go about insuring it. Since you don’t technically own the car, it might seem like it also wouldn’t be your responsibility to insure it. However, just like you’d have to buy insurance for a car you purchased, you’ll also have to carry insurance for any vehicle you lease.

Here’s what you need to know about insuring a leased car:

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

Regardless of whether you lease or own your vehicle, you’ll be required to carry your own auto insurance.

First, you’ll need to have your state’s minimum coverage, which usually requires both bodily injury and property damage liability insurance. These coverages pay for damage to other people’s property and medical costs for anyone injured in an accident you’re responsible for.

Good to know: Nearly every state requires its drivers to carry liability insurance, and leased vehicles are no exception.

Most leases also require collision and comprehensive insurance on the vehicle for the entirety of the lease:

  • Collision insurance: This is designed to pay for damages to your vehicle from an accident. It could apply after an accident where your vehicle collided with another, regardless of who is at fault. It also protects you if you’re in an accident that doesn’t involve another vehicle, such as if you hit a tree or telephone pole.
  • Comprehensive insurance: This covers damage not caused by an accident. For example, it may apply if your vehicle is stolen, vandalized, or damaged by inclement weather.

Depending on where you live, your state may require that you carry some additional insurance coverages.

Learn More: Full Coverage Car Insurance: What Does It Mean?

Uninsured and underinsured motorist coverage

Nearly half of all states require drivers to carry uninsured and/or underinsured motorist coverage. This coverage is designed to limit your losses in case an uninsured or underinsured driver causes an accident.

These states require uninsured or underinsured motorist coverage:

  • Connecticut
  • District of Columbia
  • Illinois
  • Kentucky
  • Maine
  • Maryland
  • Minnesota
  • Missouri
  • Nebraska
  • New Jersey
  • New York
  • North Carolina
  • North Dakota
  • Oregon
  • South Carolina
  • South Dakota
  • Vermont
  • Virginia
  • West Virginia
  • Wisconsin

Find Out: Should You Buy or Lease a Car? Pros and Cons of Each

Medical payments coverage and personal injury protection (PIP)

A handful of states also require all drivers to carry either medical payments coverage or personal injury protection.

Medical payments coverage is designed to pay for medical bills for you and your passengers, while PIP pays for medical bills and other losses, such as lost wages or physical therapy. Both of these coverages apply regardless of which party is responsible for the accident.

Only two states require medical payments coverage:

  • Maine
  • Wisconsin

The following states require PIP:

  • Arkansas
  • Delaware
  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Oregon
  • Pennsylvania
  • Texas
  • Utah

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Does my lease agreement require insurance?

The company you lease your vehicle from will most likely require that you carry insurance above and beyond the state’s minimum. This protects the company so it won’t be on the hook for any losses if the car is damaged or totaled in an accident.

Your lessor will likely require comprehensive coverage and collision coverage, in addition to your state’s minimum liability coverage and any other mandated coverages like uninsured/underinsured motorist coverage.

Some leasing companies may also require you to carry gap insurance — “guaranteed asset protection.” This type of coverage is designed to pay for the amount you still owe on the lease.

How gap insurance works: Say your leased vehicle is totaled in an accident while you still owe $2,500 on the lease. Your gap insurance would pay for that $2,500 (in addition to the actual cash value of the car).

Gap coverage ensures the lessor gets the amount they’re owed while you aren’t stuck paying out of pocket for a car you don’t have anymore.

It’s worth noting that not all lease agreements require you to obtain gap insurance. In fact, many lessors include gap coverage in your contract, meaning you won’t have to obtain it elsewhere or pay extra for it.

Ultimately, car insurance is one of the costs of having a vehicle, regardless of whether you own or lease it. The good news is that insurance on a leased vehicle doesn’t just protect the company you’re leasing the vehicle from. It also protects you from having to pay out of pocket after an accident.

If you’re in the market for car insurance on your leased vehicle, Credible can help. Credible’s insurance marketplace allows you to compare rates from multiple auto insurance carriers so that you can find the policy that best fits your needs.


Need car insurance?
The Credible marketplace, which includes insurance services by Young Alfred, makes it easy to find a carrier and policy that’s right for you.

  • Fully online — Fill out all insurance forms online and buy auto coverage without ever picking up the phone. If you have any questions, Young Alfred offers 24/7 customer service.
  • Save time, money, and effort — Compare quotes from highly rated car insurance providers in your area — it’s fast and easy.
  • Data privacy — Your information is kept safe and secure. We don’t sell your information to third parties, and you won’t get any spam phone calls from us.

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Disclaimer: All insurance-related services are offered through Young Alfred.

About the author
Erin Gobler
Erin Gobler

Erin Gobler is a freelance personal finance writer with more than eight years of experience writing online. She’s passionate about making the financial services industry more accessible by breaking down complicated financial topics in simple terms.

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