It is very common to lease a vehicle. The pricing and packages for leasing vehicles have become quite competitive. You should carefully review the insurance requirements in your lease agreement. There are many requirements. Unknowingly, you could be charged thousands of dollars if you don’t understand a clause.
Insurance to Protect You
An auto accident can cause damage to your vehicle and injuries to others. However, the financial consequences of an accident can be severe. Most states require liability coverage because of these financial considerations. A minimum of $25,000 is usually required per occurrence.
It is vital to have liability insurance that is in compliance with the law. However, you should also ensure that you have adequate coverage to protect your assets. A single accident can cause serious injuries to others and could result in a costly claim.
It is important to have the right insurance for you, with medical costs on the rise and jury verdicts increasing.
Drivers with low insurance could be personally liable for a part of a large jury verdict. Without enough protection, it may take years or even decades to complete a judgement.
How much coverage is required for a leased vehicle. You should check your lease agreement to see if there is an insurance requirement. Although there are legal requirements for all cars, these amounts are usually very low and provide very limited protection.
Although lease agreements usually have lower minimum requirements than state laws in general, you should still purchase as much coverage and as many services as you can afford. A standard amount to be eligible for a lease is $300,000.
Insurance to Cover Your Car
Your leased car will only need liability insurance. Your leased vehicle will need physical damage coverage. In the event of an accident, this will cover the cost to repair or replace your car. This includes comprehensive and collision benefits.
This type of coverage usually does not have a stated limit. The policy will cover the cost of repairing or replacing your car, subject to your maximum deductible.
You can adjust the amount of your deductible to suit your needs. You can set it as low as $100, or as high as $1,000. The maximum permissible deductible is usually stated in lease agreements. It is typically $1,000.
A higher deductible will mean lower insurance costs. It is still an option, even though you will be taking a greater out-of-pocket chance.
The insurance company will only pay the car’s book value or market value, based on the use and mileage. This amount will often be lower than the remaining balance of your lease agreement or loan, if you borrowed money to purchase the car.
The leasing company will be paid by your insurance company the book value. You will then have to pay the difference. Gap Insurance is another option to protect against this risk. This benefit is available at the time of vehicle purchase or lease. This coverage is not usually purchased by most people.
Insurance to Protect the Leasing Company
Your policy protects you and your lease company. Many auto lease agreements require that you list them as an extra insured in your insurance policy. This protects the leasing company from liability.
They will also ask that they are listed as a loss payee. This means that any payments made to the insurance company for repairs or replacements of the damaged vehicle will include the name of the leasing company on the check. If the repair cost was $5,000 you cannot use the funds to fix the vehicle and instead leave it unrepaired.
Your agent should discuss your lease agreement. While you will need to ensure your policy conforms to the terms of your contract and meets your financial protection requirements, it is also important to discuss your lease agreement with your agent.
