Does Car Leasing Include Insurance?

Does car leasing include insurance? No, most don't have insurance. You'll need liability insurance for a state's requirements and additional coverage for the owner's requirements.
Written by Jason Tushinski
Reviewed by Kathleen Flear
A common question people ask is if car leasing includes insurance. Car leases typically do not include insurance, but you still need to purchase it before you can drive the vehicle.
Almost every state has
minimum insurance requirements
that must be met before you can drive a
leased car
, and you may have to purchase additional coverage as per your lease agreement.
Once you’ve leased a car, finding
car insurance
at a great price is easier than you might think.
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Here’s what you need to know about leased cars and insurance.
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How a lease works

When you lease a car, you are signing an agreement to essentially rent the car for a long-term period.
Once you sign your lease, you’ll pay a monthly fee to drive the car. When your lease is up, you can either return the car to the dealer, trade it in for a new model or, if the option is available, buy it outright. The choice is yours.

Does leasing include insurance?

No, a car lease contract does not come with car insurance. You will need to find a carrier yourself to insure you and the leased vehicle, and you will have to meet certain coverage requirements.
In every state except
New Hampshire
, liability insurance is required at minimum if you want to drive a car, leased or owned.
Liability insurance
covers you for damages or injuries caused to another driver if you’re found to be at fault in an accident.
While liability insurance is the minimum requirement, most lessors will require you to buy additional insurance coverage to protect the leased vehicle. This usually includes
collision coverage
Keep in mind,
personal injury protection
insurance is required in 12 states and Puerto Rico. It covers expenses for you, another driver on your policy, or your passengers in a collision, no matter who is at fault. Personal injury protection insurance is mandatory in the following states:
Key Takeaway If your state has minimum car insurance requirements, be prepared to buy collision and comprehensive insurance—in addition to liability insurance—when you lease a car.
MORE: How to calculate a car lease payment

Leased car insurance requirements

Typically, lessors will require you to buy several types of insurance before you can drive your car off the lot. The two most common are collision and comprehensive insurance.
  • Collision insurance covers your vehicle in the event of a collision with another car or fixed object.
  • Comprehensive insurance covers your vehicle in the event of damage from accidents not involving another vehicle or fixed object, such as a tree falling on your car or damage from an adverse weather event.
Lessors may require other types of insurance, as well, in an effort to protect their investment. Remember, they own the car—not you.
You may be asked to buy
gap insurance
, which covers the difference between your car’s worth after an accident and what you still owe on your lease.
Your lessor may also mandate
uninsured motorist coverage
, which protects you if you're hit by an underinsured or uninsured driver. This insurance also provides coverage if you’re the victim of a hit-and-run.
Some leases require you to buy original equipment manufacturer parts
(OEM) coverage
. This insurance covers repair costs and any charges related to the restoration of original parts to the leased car. If you’re returning your car at the end of the lease, OEM insurance will ensure you are returning it as close to its original condition as possible.
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Insurance costs on a leased car vs. a financed car

Comparing insurance costs of a leased car versus a financed car is essentially a wash—you’ll be spending roughly the same amount of money.
Both lessors and financiers, or lienholders, have one thing in common: you’re driving their car and they require you to be insured in order to protect it.
If you’re financing a car, you’re likely to be required to add
supplemental insurance
to your policy since another party—in this case, a lienholder—has a financial interest in the car you’re driving.
This is similar to buying insurance for a leased car. Such coverage protects you from out-of-pocket costs in the event of an accident or damage, while also protecting your lessor’s or lienholder’s investment in the car.
Key Takeaway Your lease may require you to purchase a lot more than just your state’s minimum liability coverage—and that could mean increased insurance premiums.

Leasing’s impact on insurance costs

State laws on car insurance vary, so you’ll have to check with your state DMV to find out exactly what coverage is required. On top of that, you’ll need to heed your lease agreement and add the insurance required by the lessor.

What’s better—leasing or buying a car?

Ultimately, the answer to this question depends on you and your budget. There are pros and cons to both leasing and buying, and we’ll run through the most prominent ones here.
Here are the advantages you’ll enjoy when leasing a car:
  • You can drive the newest vehicles on offer
  • Far fewer maintenance worries than with an older car
  • No need to sell the car if you want a new one
  • Easier time getting rid of the car once the lease is up, as opposed to owning it
  • Monthly payments are lower than financing
  • Your car is always under warranty with a lease
Leasing a car isn’t all sunshine and roses—here are the disadvantages of leasing a car:
  • Not owning the vehicle means you’ll have no equity in it
  • Any customizations must be removed before the car is returned
  • Leased cars have mileage restrictions
  • Surpassing mileage restrictions and excessive wear on the car may cost you money
  • Breaking a lease can be a difficult and pricey exercise
  • Leasing is more expensive than buying a car in the long run
  • You’ll need a steady income to lease
Here are the good things about buying a vehicle:
  • The car is yours for however long you want
  • No limits on mileage
  • If you own, you only have to pay to insure the car
  • You build equity when you own, which can be put towards a new car
  • Save more money in the long run than leasing
  • Once the car is paid off, you can sell it
  • The car is yours, so you can customize it
Buying a car also has its drawbacks:
  • Higher monthly payments due to you paying off the entire price of the car
  • The more mileage and wear and tear on the car, the more it depreciates
  • Once the warranty expires, repairs can be expensive
  • Danger of going upside down on your loan, where what you owe on the car is more than it's worth
  • More costs upfront when buying as opposed to leasing
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In most states, you’ll need insurance in order to drive a car, whether you’re leasing it, financing it, or you own it outright. Insurance is protection—for a lessor, a lienholder, and for you.
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Frequently asked questions

Who pays for insurance on a leased car?

You, the lessee, pay for any insurance on a leased car. You’re paying to drive a car you don’t own. By paying for the car’s insurance, you’re protecting the lessor’s property as well as your own liability.

Is it cheaper to lease or finance a car?

It’s a wash—you’ll be paying roughly the same amount to insure either a leased or a financed car.
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