Do you need insurance for a leased car?

You still need car insurance if you lease a vehicle. In fact, you could need more coverage than many owned cars — this is because the leasing company will likely require more than the minimum coverage in your state.

Here’s what to know about insuring leased cars, including how it works, how much coverage you typically need, and what happens if your leased car is damaged or totaled.

Learn: How car insurance works

How much insurance do you need for a leased car?

Most leasing companies require you to get full coverage insurance, which generally includes:

• Liability insurance
• Collision coverage
• Comprehensive coverage

Some leasing companies could also require:

• Higher liability limits than your state's minimums
• Lower deductibles
• Gap insurance
• Specific coverage requirements written into your lease agreement

For example, your state might have minimum liability limits of 25/50/25 — meaning $25,000 bodily injury coverage per person; $50,000 per accident; and $25,000 for property damage. But your leasing company could require liability limits of 100/300/50, plus collision, comprehensive, and gap coverage.

Why leasing companies require full coverage insurance

Leasing companies still own the car you’re driving, so they have a pretty big financial interest in making sure it stays safe. If you damage or total the vehicle (or if it’s stolen), your leasing company wants enough insurance in place to ensure its interests are protected.

Full coverage helps reduce some of this financial risk by covering damage from things like:

• Accidents
• Theft
• Weather
• Vandalism
• Falling objects
• Animal collisions

If you carried only liability coverage and your leased vehicle was damaged, insurance would pay for damage you caused to other people — but not repairs to the leased car itself. By requiring full coverage, leasing companies reduce their risk of losing money if something happens to the vehicle they’re letting you drive.

Do you need gap insurance for a leased car?

Gap insurance covers the difference between what your car is worth and what you still owe if the vehicle is totaled. Cars tend to lose value quickly, so there’s a chance you could owe more than the car’s actual cash value (ACV) if it’s totaled early in the lease term.

Because of this, leased vehicles generally require gap insurance. Many leased vehicles include gap coverage as part of the lease agreement, so it’s likely already rolled into your monthly payment. However, there could be some instances where you’re asked to purchase coverage separately. Check your lease paperwork to confirm if you already have it.

Gap insurance example: Say you total your leased car, and your insurance company determines it’s worth $28,000. If your lease payoff amount is $32,000, there would be a “gap” of $4,000 that you’d be responsible for paying yourself. This is where gap insurance would step in.

What happens if you don’t have enough insurance on a leased car?

Leased vehicles come with contractual requirements. Falling below these stipulations could lead to consequences, such as:

You could end up with force-placed insurance

The first thing your leasing company might do if you don’t meet your insurance requirements is buy a policy for you and add the cost to your monthly payment. This is called force-placed insurance.

This might not seem like a big deal. However, the insurance bought on your behalf is usually much more expensive than it would be if you got a policy yourself.

You could be penalized for violating your lease agreement

Failing to meet your leasing agreement’s minimum insurance requirements can be seen as a violation of your contract, which could lead to a host of other consequences. These should be spelled out in your agreement but could include fees, penalties, a force-placed insurance policy, or having your car taken away.

You could face larger out-of-pocket costs after an accident

You could also be responsible for some major out-of-pocket costs in the event of an accident. So if you’re thinking about dropping coverage to save money, be mindful of the consequences. It’s often not worth the risk.

How much does insurance cost for a leased car?

There isn’t a separate insurance policy specifically for leased vehicles. In general, you’ll be required to carry full coverage insurance with potentially higher liability limits or gap coverage layered on top.

As of 2023, the national average cost of full coverage car insurance was about $1,438 per year, according to the latest data from the National Association of Insurance Commissioners. You can use this average as a starting point. However, your total could be different depending on your lease requirements and the vehicle itself.

Can you choose your own insurance for a leased car?

You can typically choose your own auto insurance company as long as the policy meets your leasing company’s requirements. So you can still shop around and compare quotes from multiple companies to find a good deal.

Taking the time to shop around could save you money in the long run, such as if you:

• Are able to bundle auto insurance with renters or homeowners insurance
• Opt for a higher deductible (if your lease allows it)
• Ask about and take advantage of car insurance discounts

What happens if you total a leased car — and who pays?

If your leased car is totaled, here’s what could happen:

• Your insurance company pays the vehicle's actual cash value.
• The leasing company receives that payment.
• If there’s a remaining balance, gap insurance might help cover the difference.
• If you don’t have gap coverage, you could potentially owe the remaining amount yourself.

For example, say your leased vehicle is worth $30,000 after an accident, but the remaining lease payoff amount is $34,000. If you have gap insurance, it might cover that extra $4,000 difference. If not, you could end up owing that amount yourself.

Leased car insurance vs. owned car insurance

Car insurance for a leased or owned vehicle is virtually the same. The difference is only in how much minimum coverage you might require.

Here’s a quick comparison between the minimum liability insurance required for a car you own and the full coverage insurance needed for a leased vehicle:

Keep reading: How much car insurance do I need?