Leasing a car sometimes results in lower upfront expenditures than purchasing a vehicle. And, while you’ll have to pay for car insurance whether you lease or buy your next pair of wheels, insuring a leased vehicle may cost more.
Car leasing insurance requirements
When you lease a car, you’ll need to satisfy both your:
- State’s minimum car insurance requirements.
- Leasing company’s insurance requirements.
In some circumstances, leasing a car rather than purchasing it altogether may necessitate additional insurance.
State car insurance requirements
Whether you finance or lease your vehicle, you must fulfill your state’s minimum car insurance requirements. The quantity of coverage and type of insurance required vary by state.
Depending on where you live, required coverage may include:
- Bodily injury liability coverage provides compensation if you damage someone else in an at-fault car collision. It also pays lost wages if the wounded person is unable to work owing to the collision.
- Property injury liability insurance pays for damage to another person’s vehicle or property in the event of a collision you caused.
- Uninsured and underinsured motorist coverage pays out if you are involved in an accident that you did not cause and the other driver does not have enough (or any) insurance to cover your medical expenses or automobile repairs.
- Personal injury protection, or PIP, covers your and your passengers’ medical bills as a result of an accident, regardless of fault. It can also cover missed wages, burial fees, child care, and other services that you are unable to perform as a result of the crash injuries.
- Medical payments coverage, or MedPay, pays for medical bills for you and anyone else in your car at the time of the accident, regardless of whether you were at fault. It can also pay funeral expenses following a deadly accident.
Leasing company requirements
Leasing businesses frequently need higher liability limits than state minimums, which costs extra. In addition to the coverage required by your state, you will most likely need to purchase:
- Collision coverage pays for repairs following most car accidents.
- Comprehensive coverage, which includes damage to your vehicle from most occurrences other than a traffic collision. This includes damage caused by hail, flooding, and even riots.
Adding them to liability insurance would result in a complete coverage policy. Although this is more expensive than purchasing your state’s minimum required insurance, ReliableInsurance recommends increasing your coverage above those minimums, which are frequently insufficient to protect your financial standing if you cause a serious accident, even if your car leasing company does not require it.
According to ReliableInsurance June 2024 analysis, the average annual cost of full coverage vehicle insurance in all states for 35-year-old male and female drivers with no recent accidents and good credit is as follows.
Average annual car insurance costs for full coverage by state
| State | Median rate |
| Alabama | $1,716 |
| Alaska | $1,734 |
| Arizona | $2,085 |
| Arkansas | $1,764 |
| California | $1,638 |
| Colorado | $2,293 |
| Connecticut | $1,742 |
| Delaware | $1,995 |
| Florida | $3,067 |
| Georgia | $2,014 |
| Hawaii | $1,610 |
| Idaho | $1,162 |
| Illinois | $1,538 |
| Indiana | $1,421 |
| Iowa | $1,381 |
| Kansas | $1,806 |
| Kentucky | $2,394 |
| Louisiana | $3,037 |
| Maine | $1,234 |
| Maryland | $1,873 |
| Massachusetts | $1,296 |
| Michigan | $2,301 |
| Minnesota | $1,667 |
| Mississippi | $1,804 |
| Missouri | $1,967 |
| Montana | $1,738 |
| Nebraska | $1,432 |
| Nevada | $2,184 |
| New Hampshire | $1,119 |
| New Jersey | $1,986 |
| New Mexico | $1,835 |
| New York | $1,963 |
| North Carolina | $1,887 |
| North Dakota | $1,528 |
| Ohio | $1,209 |
| Oklahoma | $2,030 |
| Oregon | $1,346 |
| Pennsylvania | $1,696 |
| Rhode Island | $2,413 |
| South Carolina | $1,850 |
| South Dakota | $1,671 |
| Tennessee | $1,751 |
| Texas | $2,567 |
| Utah | $1,496 |
| Vermont | $1,082 |
| Virginia | $1,619 |
| Washington | $1,492 |
| Washington, D.C. | $1,737 |
| West Virginia | $1,667 |
| Wisconsin | $1,516 |
| Wyoming | $972 |
Gap insurance for a leased car
Depending on your lessor, you may also require gap insurance, which pays out if you total your vehicle. This coverage compensates the difference between the value of your vehicle at the time of the collision and the amount owed on your auto loan or lease.
For example, suppose you leased a car for $35,000 and totaled it a week later. The car was valued $33,000 at the time of the crash. Gap insurance will cover the $2,000 difference between the value of your car and the balance owed on your lease, which is covered by collision insurance.
Insurance for leased cars at a glance
| Coverage type | What it pays for |
| Liability coverage | Medical costs due to injuries or deaths from an accident you caused, and repair costs for property you damaged. |
| Uninsured motorist coverage | Medical and repair costs after an accident with an uninsured driver. |
| Underinsured motorist coverage | Expenses from an accident with a minimally insured driver. This coverage pays once the underinsured driver’s coverage limits have been met. |
| Collision coverage | Repair expenses from traffic-related accidents, regardless of who is at fault. |
| Comprehensive coverage | Repair costs from events outside your control — including weather events, hitting an animal while driving, theft and vandalism. |
| Medical payments coverage | Medical expenses for you and your passengers after an accident regardless of fault. |
| Gap insurance | The difference between what you owe on your car and your car’s true market value. |
| Personal injury protection insurance | Medical expenses, as well as lost wages, child care, funeral costs and other losses due to an accident regardless of fault. |
