Car Insurance for a Leased Vehicle

Between gap and liability insurance, is your leased vehicle properly covered?

Car Insurance for a Leased Vehicle

Leasing a vehicle, rather than buying it, is kind of like renting an apartment. You have a lower down payment, you’re under warranty for many of the repairs, and you can get a new car every few years. But, if you lease a vehicle, you’re not earning equity — meaning, when your lease is over, you have no stake in the vehicle and thus cannot sell it. Even though you don’t technically own a leased vehicle, you still need your own insurance for it. And because of the nature of your lease agreement, there are some considerations to think about with leased vehicles. Let’s explore.

  1. Why lease?
  2. What coverage do you need?
  3. Gap Coverage Insurance 101
  4. What to do after your lease ends?
  5. Ways to save?
  6. Getting insurance

Why lease a vehicle?

The decision to lease or finance (or buy outright, if you can) is a personal decision. But, if you’re interested in leasing a vehicle, there are some benefits to consider. First, leasing a vehicle is great if you’re a low-mileage and low maintenance driver. Because most leases have mileage restrictions on their vehicles and require vehicles be kept in good condition, many people find having a lease to be too constraining for their daily life. But if this isn’t a consideration for, leasing might be a good decision.

Another benefit of a leased vehicle is that it tends to be cheaper than financing a vehicle. The way most lease payments work is you’re paying the depreciation that occurs while you use it. Most of the time your monthly lease payment will be lower than a loan payment.

The last major benefit of leasing a vehicle is that you get a new car every few years that’s under warranty. Although you will be responsible for some of the lower maintenance issues like changing the oil or tire rotation, bigger mechanical issues will be dealt through the warranty.

What coverage do you need for a leased vehicle?

Because you’re going to have to return your leased vehicle in the same condition you received it, it’s important to make sure your coverage is spot on. This is the coverage you’ll want:

Bear in mind, however, only having liability coverage will probably put you in violation of your lease agreement because it offers no physical protection to your vehicle in the event of an at-fault accident. So, in addition to these coverages, you’ll need:

A part of collision coverage, gap insurance is most likely required by your leasing agreement as it’s designed for newer vehicles. Basically, gap insurance is designed to protect you against depreciation in the event your vehicle is totaled or stolen. As most claims payout will only give you what your vehicle is currently valued at, you might be underwater if you can’t afford the difference between the lease’s listed value and what your insurance company will give you.

Gap Insurance

There’s a couple things about gap insurance that you should consider. Firstly, not every insurance company actually provides it. For example, while GEICO is one of the largest providers of insurance, they currently do not offer gap insurance.

Secondly, you can get gap insurance from a couple of different sources. Sometimes your leasing company or dealership can provide you with gap insurance, but at an inflated price. Most of the time, the figure they present will be more expensive than what your insurance company would charge you. Your best bet is to find an insurance company that will offer you gap coverage rather than through the dealership.

Your lease what?

While there’s a lot to say about what your next steps are after your lease ends in terms of getting another vehicle, it’s much more straight-forward when it comes to insurance.

  • If you’re extending your lease: maintain insurance
  • Trading in vehicle for new one: update insurance with new vehicle information
  • Buying the vehicle: remove leasing company from vehicle and update with loan/lien information, if necessary
  • Walking away: if you’re going car-free for a little, just cancel your insurance! You might want to invest in some non-owners insurance.

Ways to Save

If you're already contributing to a monthly lease payment, you'd want to make sure your insurance premium is as low as possible as well. Let's break down our top ways to save on auto insurance for every stage of your car ownership.

Pay Smart

If you have the ability for pay all of your premium up front, you can save some money on your auto insurance. Because you're cutting out the cost of transaction fees and giving your company the premium up front, they tend to reward you with a lower premium. This is also true if you can pay by your bank account rather than a debit or credit card.

Savings Based on Method of Payment

Savings with Paid in FullSavings with EFT


Keeping all your insurance policies in one basket can help save you time and money!

Savings on Bundlings

Savings with RentersSavings with Home


Telematics can be a great option for saving money while leasing a vehicle because of how they work. Basically, telematics are plug-in devices that monitor the way you drive to generate a more accurate premium. Driving carefully and less often can result in a lower premium. Because a leased vehicle has mileage restrictions and you need to take care of the vehicle (as you're returning it), this might be a good way for you to save. While this program isn't available in every state, here are some major insurers with corresponding discount possibilities.

CompanyEstimated Savings
Progressive's SnapShotAverage of $130
Allstate's DrivewiseAverage of 10-25%
State Farm's Drive Safe & SaveUp to 15%
Esurance's DriveSenseVaries
Nationwide's SmartRideUp to 40%
Liberty Mutual's RightTrackAverage of 5-30%

Shop around

No matter what stage of owning a car you're in, it's always a good idea to look to see what other companies would be charging you for auto insurance. Only with The Zebra can you shop other rates to see if you could be getting a better rate elsewhere. Get started today.

Getting insurance with a leased vehicle:

If you decide a leased vehicle is right for you, make sure you have the right coverage. You’ll want to inform your insurance company you’re leasing a vehicle as well as add gap insurance to your policy. Remember, it’s almost always cheaper to go through your insurance company rather than the dealership for gap insurance. Start shopping for car insurance for your leased vehicle with us here.

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Recent Questions:

Car Insurance for a Leased Vehicle

What can I expect to pay for first time car insurance?

Sep 13, 2018

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I was billed for forced car insurance even though I already had it

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May 14, 2018

Is it standard for an agent to inquire about the financing of an auto? Will they review the application to ...

Should I get gap insurance or is full coverage enough?

May 13, 2018

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Additional Resources:

Car Insurance for a Leased Vehicle

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