Car Insurance for Leased or Financed Car

If you have recently acquired a leased or financed car, you may have read in your agreement that you are required to carry car insurance. This requirement is the finance or leasing company’s way of insuring their collateral: the leased or financed car.

Extent of Coverage

How much car insurance you will be required to have will depend on the company that leases or finances your vehicle. To make sure you get the proper coverage, you need to read your lease or finance contract and understand how much of the following types of car insurance coverage you will need:

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• Liability Coverage
• Comprehensive and Collision Coveraget
• Medical Coveraget
• Gap Insurance

Your lease or financing agreement may require additional coverage. Be sure to find out what car insurance coverage you are required to have on your leased or financed car!

Forced Auto Insurance Coverage

If your car insurance is cancelled, the insurance companies will sometimes send the leasing company or finance company a notification of non payment or cancellation. This lets the leasing company know there is no longer a car insurance policy covering the vehicle. When this happens, the finance or leasing company will sometimes force insurance by taking out an insurance policy on the leased or financed vehicle that you will have to pay for.

TIP: This coverage can be expensive. In order to avoid paying a high insurance payment for a policy forced by the leasing company, do not let your insurance be canceled.

Gap Insurance

Your lease or financing agreement will likely require you to include gap insurance as part of your plan. Gap insurance is particularly important because it protects you, and your leasing company, if the car is totaled at a time when its actual value is less than the amount you still owe on the loan. If your car is a total loss in an accident, the insurance company will pay you the actual cash value (ACV) of the vehicle. If this amount is less than your loan payoff, then you will need to keep making payments on a car which you can no longer drive. Gap insurance solves this problem by paying the difference between what you owe and what the car is worth.

TIP: Even if your lease or finance agreement does not require gap insurance, you should strongly consider adding it to your policy. Gap insurance can save you a lot of money should your car be totaled in an accident.

To find an insurance agent in your area and to get a quote on your financed car or leased car insurance, click here and take advantage of the Free Advice quote center!

For more information about getting the right car insurance policy to fit your needs, check out the following articles:

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Case Studies: Car Insurance for Leased or Financed Car

Case Study 1: Meeting the Coverage Requirements

After leasing a car, John carefully reviewed his lease agreement to understand the car insurance coverage required by the leasing company. He ensured that his policy met the specified coverage limits and included additional forced auto insurance coverage as mandated. By maintaining proper insurance, he avoided the need for the leasing company to force an expensive insurance policy on the vehicle.

Case Study 2: Understanding Gap Insurance

When Sarah’s financed car was involved in a severe accident, it was declared a total loss. Fortunately, she had gap insurance as part of her car insurance policy, which covered the difference between the actual cash value of the car and the remaining loan amount. This saved Sarah from having to make loan payments for a car she could no longer drive.

Case Study 3: Considering Optional Gap Insurance

Upon reviewing his finance agreement, Alex discovered that gap insurance was not required but decided to add it to his car insurance policy for added protection. This decision proved beneficial when his car was stolen and later recovered with significant damage. The insurance company’s payout, including the gap coverage, helped Alex pay off the remaining loan balance without incurring additional financial burden.