Insuring a leased vehicle is not the same as insuring a vehicle that you own. When you purchase a car, you have numerous insurance options from which to choose. But, if you lease a car, you will be obligated to purchase certain types of insurance. Most likely, these will be part of your lease agreement.
Usually, an auto dealer will demand that you buy collision and comprehensive insurance. However, a third type of insurance, known as gap insurance, also comes highly recommended. Here’s what you need to know about them.
Collision insurance is useful if your vehicle collides with either another vehicle or an object. It also covers you if your vehicle is overturned. What you need to know about collision insurance is the fact that it most likely comes with a deductible. If you have to use it, you’ll have to pay for this deductible yourself.
Another common type of auto insurance you need to get when entering into a lease agreement with an auto dealer is comprehensive insurance. It only protects your car against damage not related to an accident, such as:
- Natural disasters;
- Falling objects;
- Damage done to your car by animals;
- Civil disturbance.
Just like collision insurance, it also includes a deductible.
Although not required, gap insurance is very important for leased vehicles. It protects your car if it’s totaled while you are leasing it.
Insurance companies only pay for the current value of your vehicle. But studies have shown that your car’s value drops dramatically right after leaving the dealership, and it continues to drop with each passing month. If you total your vehicle a year after getting it, your insurer will only pay for its current value, not the entire price, and you will have to cover the rest out of your own pocket. However, gap insurance fills in this gap, and takes care of you so you don’t have to pay for something that you don’t have anymore.