Despite lucrative deals offered by auto dealers to the buyers, the number of leased vehicles is on a rise due to its inherent benefits. Auto consumers not only find leasing as financially attractive, but it also fits well in the changing lifestyle. The choice is very personal.
However the decision does not absolve you of your insurance liabilities. Quite understandably, when a car is leased, it continues to belong to the lease company and they want to ensure that they do not lose out on their investment in case of any damage to the vehicle or if it is totaled or stolen.
Most leases might necessitate you to buy a higher auto insurance cover than the basic minimum that’s stipulated by your state.
Additionally, the auto dealer or the financier bank will require you to buy ‘collision’ and ‘comprehensive’ coverage. ‘Collision’ covers the damage to the car from an accident with another automobile or object while ‘Comprehensive’ covers a loss that is caused by something other than a collision with another car or object, such as fire, vandalism, theft or collision with an animal.
Both these coverage requires a deductible meaning that you must pay as a part towards the claim while the insurance company pays up the rest of the amount. The upper limits for these are set depending on your lease agreement.
Meeting the ‘GAP’
The leasing company may also require Guaranteed Auto Protection or "GAP insurance” as it is commonly called. This is a coverage that will go towards paying the difference between what you owe to the leasing company and what the insurance company pays in case your car is ‘totaled’. The insurance company pays on the basis of the car's actual value while taking the depreciation into account. The difference between the two is known as the ‘gap’.
In case of auto leasing, the cost of gap insurance is generally included in the lease payment since the auto dealers generally buy a master policy from an insurance company to cover all their leased cars. They charge you for a "gap waiver" which exempts you from paying the dealer the gap amount in case your leased car is totaled. However, there is no obligation on your part to agree to have GAP insurance included in your lease agreement.
Expensive Yet Smart
This may be more coverage than you would usually buy but having sufficient car insurance coverage is smart. Many think of getting by with the minimum coverage that’s required by law but this can be risky. If you have insufficient insurance coverage, you can be sued for additional money after your insurance has been paid off.
Generally, the leasing companies also offer insurance. This may seem as a convenient option since you do not have to waste time in shopping around for auto insurance but there is no compulsion to stay with the same company. In fact, looking elsewhere may get you lower rates and discounts.
You can request for numerous auto insurance quotes for help in taking a sensible decision.