Car crash!
A car insurance policy is a contract between you the policyholder and the insurance company that underwrote the policy you bought. You the policyholder accept to pay a certain amount of money as premiums and the company agrees to pay for your losses up to a certain limited amount of money.
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The limit of your car insurance policy.
The maximum money in the coverage your insurance pays for your claim is called the limit of the insurance policy. People who bought the same insurance policy receive different payouts just because the limit of their policies is not the same. For instance, we may be on the same plan yet I am entitled to $50000 whereas your maximum payout settlement is only $25000.
Your premiums will largely depend on many factors like the minimum required coverage for each country or state, your age, your gender, driving behaviour, previous traffic offences, credit score, car model, car age, car make and so many other factors.
What I need to stress more is that, car insurance policies vary from state to state, or from country to country, so this post may be biased towards certain parts of the world, more so in the USA. For those looking for general information, you could still gain some insights from this post.
What is car leasing?
We all have our Car dreams but unfortunately, many of us can not afford such costly wheels. But, do not lose hope, you could still drive that expensive ride you see people enjoy daily. Yes, you can lease any expensive car you ever wish, though costs vary from company to company, or from one type of car to another.
Leasing a car allows driving the car of your choice from the dealership lot by paying a monthly fee, other than purchasing the car. Just walk into any car dealership of your choice, ask for the type of car you want, fill out a form indicating your mileage and the amount of time you intend to have the car, and boom! it’s your car.
But remember, in most states, no one is supposed to drive without car insurance, especially a liability car policy. And from this article, your car insurance premiums will also be determined by how expensive it is to replace or repair the car you are driving.
What are the types of car Insurance?
There are a variety of insurance policies you could buy to cover different aspects of that car you are driving. These include the following:
Comprehensive car insurance.
- This policy protects you from all financial losses other than losses due to road accidents. For instance, you will need this coverage to cover the theft of your car, vandalism, fire, falling object, extreme weather, and others. This coverage carries a deductible and pays up to the car’s current actual cash value (ACV).
Liability car insurance.
- If you are at fault in a motor accident, you will be asked to pay the medical bills of the other people in the car you crashed. You will be asked to repair or replace their cars, and all the property damaged as a result of the accident you caused. In that case, liability insurance will help you cover such possible financial losses.
Liability typically caters for the third party only.
Collision coverage.
- If you crashed into another car or hit a stationary object, your car may need repairs before you drive again. Collision policy saves you from such financial losses. Just like Comprehensive coverage, collision carries a deductible and pays up to the current actual cash value.
Other insurance coverages people are buying include uninsured and underinsured motorist coverage, gap insurance, rental car insurance and others.
Insurance for leased vs. financed cars
Car financing means taking up a certain amount of money as a loan, and using that money to purchase the car of your choice. Here, you will be required to pay back the loaned money, interests and any additional fees in a certain specific amount of time.
Just like leased cars, you are required to purchase your state’s minimum car insurance plus all required policies stated by your financing or lessor company. For instance, you may be asked to purchase comprehensive car insurance, collision car insurance, and uninsured and underinsured car insurance in addition to your state’s minimum coverage.
gap insurance for a leased car.
If you leased your ride at $20000 and enjoyed it for 3 years, then the cost of that car will have depreciated by a certain value. We all know that if you are involved in a car crash and unfortunately your car is totalled, your insurance company will pay your car’s actual cash value (ACV). For instance, after the 3 years, your leased car could be worth $15000 as its current actual value. Gap insurance comes to help you cover your losses by paying the difference ie $20000 – $15000 = $5000.
You will be required to pay $5000 out of your pocket if you did not buy gap insurance policy to give you extra peace of mind.
Many leasing companies will not force you to buy this insurance policy but in case you can, I highly recommend it.
Do you need gap insurance coverage for your leased car?
Statics show that, more than 380,000 leased cars are written off each year, and also more than 510,000 leased cars are targeted by car thieves. Of course, those are huge statics that should be considered if you decided to lease your dream car.
What isn’t included in GAP insurance?
- The payout for your written-off vehicles for accidents gotten when under influence of alcohol.
- The payout for coverages for your written-off car as a result of fraudulent or any illegal activities. Losses due to leaving your car unattended.
- If your car is stolen by someone who has access to the keys.
- Cost of repairs or extra fittings, road tax and insurance premiums.
The best insurance for leased cars
Just like any person behind the wheels, you will be required to buy insurance coverage before driving your leased car. Your company will most likely ask you to buy both comprehensive, collision, uninsured and underinsured motorist car insurance policies. In addition to the above company requirements, there is a minimum coverage required by your country of origin or the state you originate from. One of the mandatory insurance policies remains liability insurance which I describe clearly in this post.
The best way to get cheap coverage is by getting many quotes and comparing the best companies. I recommend at least 3 different companies, done every year to get the best choice for you. What you should know is that, cheap prices do not imply better customer care so always choose wisely.
From experience with customers, small-medium companies offer the best services as compared to popular large companies, so do not underlook small upcoming companies. I have seen large companies handle more than 300 claims at ago, and this means your claim could take forever to be settled in case of a loss.
Is insurance on a leased car more expensive?
Covering a leased car is more expensive compared to covering a financed car. On the same note, covering a financed car is more costly than having your car insured. This is because, your lessor company owns the car fully and will force you to buy the highest coverage to protect their car.
For instance, I could decide to drop comprehensive and or collision coverage if I am the sole owner of my car. Your lessor company won’t let you do that because they are protecting their asset. I have a friend who is only paying liability coverage and to make it sweeter, He only pays for the minimum required coverage – of course, this is riskier through pocket friendly. You will not enjoy this privilege if you leased your car.
is car insurance cheaper on a lease?
In short, insuring a leased car is more expensive because, in addition, to meet your state’s required minimum coverage, your company will ask you to buy more coverage for their treasured asset.
who pays car insurance on a lease?
Although you do not own the car, you are still responsible for insurance coverage for the very car because, you are the one that will be pulled over or asked to pay fines in case you are found driving the non-insured car. Some car dealership usually recommends insurance companies to save you the hustle. But, I still recommend you to shop around and get several quotes before settling on one choice. Some car dealerships usually will tell you to buy the coverage from themselves which is not recommendable unless they have proof of the same service.
You will be responsible for any insurance requirements for any car you drive, and car dealerships will ask you for 99% comprehensive coverage.
Factors that affect insurance price.
I already showed how leasing or financing your car eventually hikes your car insurance premiums. Other factors determine how much you will pay as insurance coverage and these include;
- Your age.
- where you live
- How long have you been driving?
- past criminal history or convictions
- past traffic convictions
- The type of the car
- Car model, car make, how expensive your car.
- How old is your car?
- Grades in school
- Evidence of defensive driver training and many others.
How do you find a good insurance company?
In the same way, you take your time to look for the best car, you should also take your time and choose the best car insurance company, or else you don’t want your claim to take forever to be settled or trashed for no reason. While looking for top car insurance, keep the following at the back of your mind.
Chose a reputable and well-established insurance company. No one wants to pay a premium only for the company to vanish from the industry the following month.
The terms and conditions of the policy you bought should be flexible and favourable, otherwise, you may never tender in your claim.
Always double-check and see if you are getting the type of coverage you were looking for.
Note that, insurance coverage is not included in the lease price and you could end up paying way beyond your budget. Whether you buy the coverage from your dealership or an actual insurance firm, it is you who will meet all the insurance expenses out of your pocket.
