If you have recently acquired a leased or financed car, you may have read in your agreement that you are required to carry car insurance. This requirement is the finance or leasing company's way of insuring their collateral: the leased or financed car.
Extent of Coverage
How much car insurance you will be required to have will depend on the company that leases or finances your vehicle. To make sure you get the proper coverage, you need to read your lease or finance contract and understand how much of the following types of car insurance coverage you will need:
Your lease or financing agreement may require additional coverage. Be sure to find out what car insurance coverage you are required to have on your leased or financed car!
Forced Auto Insurance Coverage
If your car insurance is cancelled, the insurance companies will sometimes send the leasing company or finance company a notification of non payment or cancellation. This lets the leasing company know there is no longer a car insurance policy covering the vehicle. When this happens, the finance or leasing company will sometimes force insurance by taking out an insurance policy on the leased or financed vehicle that you will have to pay for.
TIP: This coverage can be expensive. In order to avoid paying a high insurance payment for a policy forced by the leasing company, do not let your insurance be canceled.
Gap Insurance
Your lease or financing agreement will likely require you to include gap insurance as part of your plan. Gap insurance is particularly important because it protects you, and your leasing company, if the car is totaled at a time when its actual value is less than the amount you still owe on the loan. If your car is a total loss in an accident, the insurance company will pay you the actual cash value (ACV) of the vehicle. If this amount is less than your loan payoff, then you will need to keep making payments on a car which you can no longer drive. Gap insurance solves this problem by paying the difference between what you owe and what the car is worth.
TIP: Even if your lease or finance agreement does not require gap insurance, you should strongly consider adding it to your policy. Gap insurance can save you a lot of money should your car be totaled in an accident.
Extent of Coverage
How much car insurance you will be required to have will depend on the company that leases or finances your vehicle. To make sure you get the proper coverage, you need to read your lease or finance contract and understand how much of the following types of car insurance coverage you will need:
- Liability Coverage
- Comprehensive and Collision Coverage
- Medical Coverage
- Gap Insurance
Your lease or financing agreement may require additional coverage. Be sure to find out what car insurance coverage you are required to have on your leased or financed car!
Forced Auto Insurance Coverage
If your car insurance is cancelled, the insurance companies will sometimes send the leasing company or finance company a notification of non payment or cancellation. This lets the leasing company know there is no longer a car insurance policy covering the vehicle. When this happens, the finance or leasing company will sometimes force insurance by taking out an insurance policy on the leased or financed vehicle that you will have to pay for.
TIP: This coverage can be expensive. In order to avoid paying a high insurance payment for a policy forced by the leasing company, do not let your insurance be canceled.
Gap Insurance
Your lease or financing agreement will likely require you to include gap insurance as part of your plan. Gap insurance is particularly important because it protects you, and your leasing company, if the car is totaled at a time when its actual value is less than the amount you still owe on the loan. If your car is a total loss in an accident, the insurance company will pay you the actual cash value (ACV) of the vehicle. If this amount is less than your loan payoff, then you will need to keep making payments on a car which you can no longer drive. Gap insurance solves this problem by paying the difference between what you owe and what the car is worth.
TIP: Even if your lease or finance agreement does not require gap insurance, you should strongly consider adding it to your policy. Gap insurance can save you a lot of money should your car be totaled in an accident.
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