Did you know that car leasing has grown by 91% over the last five years? In fact, one-third of millennials choose to lease a car over buying one because of the attractive perks that come with leasing and amazing deals exclusive to online clientele. Unfortunately, renting a vehicle also comes with higher insurance payments than buying one. Here is a look at five insurance facts you should know before leasing that car;
1. You need gap insurance.
In the car is stolen or totaled, you will lose both the vehicle and the money you have been paying to the car dealership if you don’t have gap insurance. Gap insurance is not mandatory, so many people overlook it. Gap insurance can save you a whole lot of grief because your usual insurance coverage won’t pay you if the car is stolen or written off. Some lease agreements already have gap insurance but be sure to take one if they don’t offer it.
2. You need collision and comprehensive coverage
Unlike in the case of buying a car, you cannot get away with just having liability insurance. The car dealership or financing company needs to know that their vehicle is protected in case of an accident or vandalism. On top of the mandatory liability insurance, most dealers will require you to take collision and comprehensive coverage to take care of their car in case of any eventualities.
In some states, you also need to take uninsured or underinsured motorist coverage to pay for your medical bills in case you are hit by a motorist who is underinsured or not insured at all. Alternatively, you can take personal injury protection cover because it will do the same thing.
3. Your liability insurance may be higher
Every state requires you to have minimum liability insurance, but the dealership may need more than that. They may require your limit to be higher than the minimum and a lower deductible. This is to ensure that the insurance will be able to cover every cost and use new spare parts as opposed to second-hand parts.
4. You don’t own the car
When you have bought a car, you take insurance coverage with your name because you own the vehicle. However, when you lease one, the car still belongs to the dealership, so the insurance coverage covers them and not you. Make sure to be clear about that when applying for insurance because it can end up messing things up later on.
5. Auto insurance is part of the initial fee
Car insurance is one of the components in a lease agreement and part of the down payment. This is why you should check to see if the lease agreement has gap insurance and what else it covers. However, it doesn’t mean you don’t need your own insurance. In fact, you can’t drive away with your car before you show proof that you have already insured their vehicle.
Insurance coverage differs from one company to another. It is, therefore vital that you get several quotes from different companies. If you do your due diligence, you will also find amazing ways to lower your insurance coverage.