Car Leasing With Insurance: Everything You Need To Know

Similar to driving a car you own or finance, you need auto insurance to legally drive a car you lease. SmartFinancial analyzed insurance requirements from multiple leasing companies and found that comprehensive and collision coverage is a common requirement. Car lessors may also require liability limits higher than what your state mandates. Due to this car insurance premiums can be higher when leasing  — a financial drawback to driving the newest models in their most trouble-free years.

Do You Need Car Insurance for a Leased Vehicle?

Car insurance is necessary when driving a leased vehicle. Driving while uninsured is illegal in most states and can result in fines, a suspended license and even imprisonment. Car leasing companies may enforce additional insurance requirements, such as higher liability limits and full coverage.

What Are the Insurance Requirements on a Leased Car?

Leasing a car will require you to meet your state’s minimum insurance mandates plus additional coverages your leasing company will likely require.

Minimum State Requirements

Most states require drivers to carry at least minimum liability coverage. Some states may enforce additional coverages, like uninsured motorist coverage and personal injury protection. Below are limit ranges across the U.S. — not all coverage types will apply to each state.

• Bodily injury liability coverage: $15,000 to $50,000 per person and $30,000 to $100,000 per accident
• Property damage liability coverage: $5,000 to $2,500 per accident
• Uninsured/underinsured motorist bodily injury coverage: $20,000 to $50,000 per person and $40,000 to $100,000 per accident
• Uninsured/underinsured motorist property damage coverage: $5,000 to $25,000 per accident
• Personal injury protection: $5,000 to $50,000 (only for states that offer no-fault insurance)

Liability insurance is the most common requirement nationwide. Below, we’ve compiled liability limit requirements per state.

State	Requirement	State	Requirement
Alabama	25/50/25	Montana	25/50/20
Alaska	50/100/25	Nebraska	25/50/25
Arizona	25/50/15	Nevada	25/50/20
Arkansas	25/50/25	New Hampshire*	25/50/25
California	15/30/5	New Jersey	15/30/5
Colorado	25/50/15	New Mexico	25/50/10
Connecticut	25/50/25	New York	25/50/10
Delaware	25/50/10	North Carolina	30/6025
Florida	–/–/10	North Dakota	25/50/25
Georgia	25/50/25	Ohio	25/50/25
Hawaii	20/40/10	Oklahoma	25/50/25
Idaho	25/50/15	Oregon	25/50/20
Illinois	25/50/20	Pennsylvania	15/30/5
Indiana	25/50/25	Rhode Island	25/50/25
Iowa	20/40/15	South Carolina	25/50/25
Kansas	25/50/25	South Dakota	25/50/25
Kentucky	25/50/25	Tennessee	25/50/15
Louisiana	15/30/25	Texas	30/60/25
Maine	50/100/25	Utah	25/65/15
Maryland	30/60/15	Vermont**	25/50/10
Massachusetts	20/40/5	Virginia	30/60/20
Michigan	50/100/10	Washington	25/50/10
Minnesota	30/60/10	West Virginia	25/50/25
Mississippi	25/50/25	Wisconsin	25/50/10
Missouri	25/50/10	Wyoming	25/50/20

*Not required if drivers can demonstrate motor vehicle financial responsibility**Drivers can pay $500 to drive uninsured

Car Lessor Requirements

When leasing a vehicle, the lessor will usually require you to purchase full coverage, which includes collision and comprehensive insurance. Your leasing company may also refer to this as “physical damage insurance.”

• Collision coverage: Pays for damages to your car when it physically strikes another vehicle or object (even if you were at fault).
• Comprehensive coverage: Pays for losses resulting from non-collision events, such as fire, hail, vandalism or theft.

Leasing companies may enforce liability limits higher than your state’s minimum requirements, as well. For example, Mercedes-Benz sets its bodily injury liability limit requirement at $100,000, which is double the highest limit enforced in any state.

Below, we’ve compiled multiple dealerships and their insurance requirements when leasing a car. Insurance requirements may vary by state and dealership.

Car Lessor	Additional Car Insurance Requirements
GM	Bodily Injury Liability: $100,000 per person; $300,000 per accident Property Damage: $50,000 per accident Comprehensive and collision coverage $1,000 maximum deductible for comprehensive and collision claims
Nissan	Bodily Injury Liability: $100,000 per person; $300,000 per accident Property Damage Liability: $50,000 per accident Comprehensive and collision coverage $1,000 maximum deductible on comprehensive and collision claims
Tesla	Bodily Injury Liability: $100,000 per person; $300,000 per accident Property Damage: $50,000 per accident Comprehensive and collision coverage $2,500 maximum deductible for comprehensive and collision claims
Mercedes-Benz	Bodily Injury Liability: $100,000 per person; $300,000 per accident Property Damage Liability: $50,000 per accident Comprehensive and collision coverage $2,500 maximum deductible for comprehensive and collision claims
Toyota	Comprehensive and collision coverage $1,000 maximum deductible on comprehensive and collision claims Leased car must be garaged
Chrysler	Comprehensive and collision coverage
Hyundai	Comprehensive and collision coverage
Honda	Comprehensive and collision coverage

Car leasing companies may enforce additional insurance requirements, such as higher liability limits and full coverage.

Should You Consider Gap Insurance?

Your leasing company may require you to purchase gap insurance, which pays for the difference between the amount owed on a lease (or loan if you’re financing) and the leased vehicle’s market value just before it was totaled in 1) a collision or 2) a comprehensive-covered loss like theft or severe weather. For example, if the leased car was worth $12,000 when totaled in an accident and the unpaid balance on your lease is $15,000, gap insurance will cover $3,000 ($15,000-$12,000).

Note: Gap coverage will not cover lease penalties, overdue payments or extended warranties.

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Is Insurance More Expensive on Leased Cars?

Insuring a leased car may be more expensive than a financed car because lessors may enforce higher liability limits. Higher limits mean higher premiums but it ensures that you can get the necessary repairs without having to reach into your own pocket.

The lifetime cost of insuring a leased vehicle is higher, too. Drivers who financed their cars can stop paying for collision and comprehensive coverage after repaying their loan. You will need to maintain full coverage so long as you continue leasing cars.

How Do You Get Insurance on a Leased Car?

Follow the four steps below to purchase a car insurance policy for a leased car.

1. Confirm the lessor’s insurance requirements on the car you want to lease.
2. Shop around for the best policy available.
3. Purchase the auto insurance policy. Keep in mind that your leasing company should be listed as an additional insured and loss payee in your auto insurance policy.
4. Provide the leasing company with a copy of your proof of car insurance. If you can’t wait for it to arrive in the mail, proof of insurance is typically accessible via mobile app or through the online member portal.

Are There Ways To Lower Leased Car Insurance Rates?

The best way to secure the lowest insurance rates is to maintain a clean driving record. Drivers with multiple accidents and moving violations pay higher premiums because they pose a higher risk, while safe drivers enjoy lower rates and may even qualify for a good driver discount.

Qualifying for other discounts can lower your insurance rates, too. If you’re insuring multiple cars, your insurer may apply a multi-car discount. If you use the same provider for insuring your car and home, you can save with a bundle discount. Discount availability can vary by carrier and state.

The lessor will usually require you to purchase full coverage, which includes collision and comprehensive insurance.

What’s the Difference Between Leasing and Financing a Car?

Drivers should expect differences in cost, ownership, insurance requirements and more when comparing leased cars and financed cars.

	Lease	Finance
Ownership	The leasing company owns the car.	You own the car after repaying your auto loan
Upfront Cost	First month’s payment + administrative fees	Typically 10% down (unless you qualify for a zero down loan) + administrative fees
Monthly Payments	Typically lower than financing	Typically higher than leasing
Bills	Lease payments for life	No more car payments after repaying your auto loan
Commitment	Terminating your lease early can incur high fees	Trade in your car for a new car (if you have positive equity)*
Insurance Requirements	Potentially higher than state minimum requirements + full coverage	Minimum state requirements + full coverage

*Your car’s market value exceeds the remaining balance on your auto loan

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You will need to maintain full coverage so long as you continue leasing cars.

Key Takeaways You must have full-coverage auto insurance if you are leasing a car. Most leasing companies require drivers to carry collision and comprehensive coverage as well as higher liability limits. Insuring a leased vehicle may be more expensive than a financed vehicle, especially in the long-run.

Whether you’re financing or leasing a vehicle, you need auto insurance. SmartFinancial makes it easy to shop around and find a policy that meets your coverage needs and budget. Just enter your zip code below or call 855.214.2291 to receive your free car insurance quotes.