Do I Need Full Coverage Insurance To Lease A Car?

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You may think of many desirable options to public transit when commuting between work, home or on busy errands. You might plan to buy or lease a car. When you choose one of the options, you may also check out the insurance coverage required. Car insurance premiums are not affected by the fact that you may be leasing or buying. You may ask yourself if you need full coverage to lease a car along with optional coverage.

Buying Vs. Leasing

The decision to buy or lease depends on various factors. Leasing a car allows you to change the vehicle every few years. You may pay lower monthly lease payments and also stress less about resale price. It might be a better option if you have stable cash flow each month. You may not own a car when you lease.

On the other side, you may buy a new or used car. You may pay in total or use financing that could be a bit higher. After a few years, you may not get a good resale value if the car is not kept in good condition. [1]Whether you buy a car or lease it, you have to get car insurance in Ontario.

What Coverage Do You Need When You Lease A Car

Leasing A Car

Your existing insurance might extend to cover the new car for a certain period of time. This is true whether you buy a car or lease a car. It is important to inform your insurance company. The process of getting car insurance is same for either. All the policy options and coverage may be the same. When you buy a car it is recommended to have full coverage insurance though not required. But when you lease a car, it is mandatory to get full coverage insurance. You may need to get collision and comprehensive coverage for a leased car. This is to protect the interests of the lienholder or the leasing company. The insurance premiums and deductibles are not different if you lease or buy a car.

Optional Coverage When You Lease Your Car

In the event of a claim when the totaled car was leased, the insurance claim will be paid to the leasing company. Most of the leasing companies now insist on getting GAP (Guaranteed Assurance Protection) insurance for the leased car. This insurance will pay for the difference in amount between the actual value of the car and how much you still owe on the car. GAP insurance is critical when you lease a car. This is because monthly lease payments are lesser when compared to financing payments. When you lease, this coverage will pay the huge difference amount between what the insurance company is willing to pay in settlement and the amount that you still owe on the car.

Another optional coverage that you could get to assure some level of protection is Waiver of Depreciation. This will usually pay for up to a 2-year term. It will pay for the total value of the car in case the leased car is totaled.

[1] https://www.ic.gc.ca/app/scr/oca-bc/ssc/vehicle/tips.html

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