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Auto Insurance for Lessees

Auto insurance for lessees is one of the most interesting and possibly misunderstood areas of car insurance coverage. One of the major reasons drivers choose to lease vehicles is the cost savings a lease can present over buying. If you usually drive newer cars anyway and therefore are likely to have a payment, a lease makes sense because a lessee can often get into the same car for a lower monthly payment than with a purchase agreement. This is in addition to other advantages like the elimination of the need to find a buyer for the car when time to get a new one. But the cost of auto insurance has to be added in to the equation when we think about leased vehicles. Auto insurance for lessees is an area of car coverage that requires some degree of tacit understanding.

Leased Cars Still Need Insurance

Auto owners across the country are required to carry car insurance owing to the various state laws mandating that they do so. Virtually every state has some form of mandatory insurance on the books, along with specific guidelines for meeting legal requirements and measures for punishing drivers for non compliance. So, it is no surprise to most of us that we still need to carry auto coverage on our cars even when they are leased. After all, we're still paying for the cars in a way through the lease payments, so we do have some financial stake in them as drivers while we still have them in our possession.

If your state requires auto liability and personal injury protection (PIP or no fault) on an auto policy for all drivers, these same rules apply to you as well. Thinking about it a little more deeply, we see that these forms of coverage usually required by states have nothing to do with protecting the covered vehicles at all, but rather, the drivers who are in them at the time of accidents. Liability and medical coverage both protect you as a driver in the event of an accident, but neither one of them does anything to protect your leased vehicle in any way from property damage that may result from the accident.

It is true that if the other driver is at fault and properly insured, the damage to your leased car would ordinarily be covered by that other driver's liability policy. But if you were at fault in the accident, how would the leased vehicle get repaired? You could either choose to pay for it out of pocket or choose not to fix it.

Additional Considerations for Lessee Coverage

Well, lien holders who have a financial stake of their own in these leased vehicles do not like relish the prospect of either of these possibilities. For this reason, in any ordinary lease circumstance the lessee would be obligated to carry additional auto insurance protection beyond that required by the state to protect the vehicle itself from uncompensated property damage. If you drive a leased vehicle, you have to insure it the same way you would if you were buying a car and had a bank loan out on it. A lease is almost the same as a loan in the sense that you have agreed ahead of time to pay for the depreciation of the vehicle for a certain agreed upon time period, after which you surrender the vehicle and the lien holder is free to sell it or lease it again to another customer. You are not paying for the entire sticker cost of the vehicle, only a certain preset portion. But this payment necessitates certain additional auto insurance protection beyond what your state requires for drivers.

As a lessee you will need to carry collision insurance. Collision in an auto policy is the part of coverage that actually protects the covered policy holder's own car from damage sustained in an accident situation. It's different from liability in a few important ways. First, it is only concerned with the cost of damage to your car, not medical costs. Second, it only covers your car and not the other one; in this sense it's the opposite of liability policies. And third, it is not concerned with liability or fault in an accident at all. If your car is damaged in an accident, your collision policy will cover the damages as necessary, up to the limit of the policy. Granted, it is secondary to the other driver's liability plan in the sense that it will not preclude the other driver's obligation to pay for repairs to your car if he or she were at fault in the accident. But even so, it is tremendously valuable to know that you have a way to pay for repairs if you do get into an accident that was your fault.

Comprehensive insurance works much the same as collision, except it takes care of only non accident sources of damage. For example, if your car is damaged in a hail storm while parked outside your apartment, or if it sustains damage in a break in, the comprehensive portion of your auto plan would be the one to file a claim against. Comprehensive, like collision, has limits of protection based on the market value of the car. Thus, it may be a good idea to think about getting gap insurance for your lease vehicle to make sure you do not owe money even after getting paid for your loss in the event your car is totaled in an accident. Gap insurance or guaranteed asset protection is an optional but useful form of coverage you can add to a policy to pay for the monetary difference between what you owe on a car and its actual value. In the case of a lease vehicle, the former number would actually be calculated using the predetermined monetary value you are have not paid for off the original sale sticker price.

Save Money on Leased Car Insurance

Car insurance for leased vehicles can get awfully expensive. You have to carry basically the same coverage you would have had to purchase if you'd chosen to buy a car instead of leasing it. For this reason the cost of an auto policy has to be figured into the overall cost of a lease before you make a decision to sign on the dotted line and take that car home from the dealership. Look at all the cost factors so that you know exactly what you are getting into as a lessee. Don't be overly charmed by a lower monthly payment you might end up paying to lease the car until you know the exact cost you will have to come up with each month to actually have it in your possession.

To save money on auto insurance for your leased vehicle, do what you can to control the aspects of cost you can control. One of these components driving cost is the provider. Get online and take a look at online insurers for your lease, because in this part of the market drivers can often find the best prices on policies from quality insurance companies. Find a deal on auto insurance for lessees.

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