What You Must Know About Lease Insurance

The lessor (financial institution or business that technically owns the car) will require you (the lessee) to have and maintain auto insurance during the entire lease period. You are required to have a minimum of $100,000 - $300,000 public liability - $50,000 property damage naming the lessor as the loss payee (the entity the insurance check will go to.) You may be limited to a maximum deductible of $250.00.

If the leased vehicle is stolen and not recovered or you are in an accident and your leased vehicle is totaled, you should know: 
1.) You will be responsible for the dollar difference between the lease payoff (total of remaining lease payments plus residual value) and the insurance company settlement. Example: lease payoff is $10,000.00 - $9,000.00 insurance settlement = $1,000.00 you owe the lessor. 

2.) If the insurance settlement is greater than the lease payoff, then you may profit. Example: Lease payoff is $10,000.00 - $11,000.00 = $1,000.00 profit. Do not assume that you will receive the $1,000.00. Remember the car is owned by the lessor.
 

NOTE: Ask your lessor who would get the $1,000.00 settlement profit. If it is you, have it put in writing as an addendum to the lease and all parties sign.

3.) You may purchase GAP Insurance (insurance that takes effect if your vehicle is totaled or stolen and not recovered) to cover the difference if you owe the lessor after your primary insurance settlement. Most lessors now offer this product. Some at no charge. If your lessor charges, compare it to what your primary insurance company charges. GAP Insurance is worth having. Remember your leased vehicle is depreciating each day and rarely will the vehicle be equal to or greater than the lease payoff.

NOTE: GAP Insurance only takes effect if your vehicle is totaled or stolen and not recovered. It pays the difference between lease payoff and your insurance settlement. It does not replace your primary insurance. It does not pay if your primary insurance settlement is greater than your lease payoff.

4.) Your lessor may require you to have a minimum deductible to reduce your out of pocket expenses to make sure repairs are taken care of. It is to your advantage to have all body damage and mechanical repairs done immediately.

NOTE: Keep all repair records. Have all needed repairs performed immediately.

5.) If you do not maintain insurance, your lessor in some leases, has the right to force place insurance and add the cost to your monthly lease payments.

6.) If your lessor is providing the insurance, you must be made aware of its total cost to you. If you are properly insured and understand the terms and conditions you will enjoy your leased vehicle more and have peace of mind. Insurance minimums will vary per provider.

Don't be afraid to ask questions.