CarInsurance.com Insights
- Drivers with leased vehicles pay about 24% more for car insurance than vehicle owners.
- Drivers leasing a new car pay roughly $500 more per year for full coverage compared to those who own their vehicles outright.
- Full coverage — the combination of liability, comprehensive and collision insurance — is mandatory on virtually every lease agreement.
Leasing a new car can be a smart, flexible way to drive a new vehicle without the commitment of ownership. However, this convenience often comes with a higher car insurance premium.
The main takeaway is clear: Insurance for leased cars typically costs 15-25% more than for vehicles you own outright. The reason is simple: when you lease a car, you don’t own the asset — the leasing company does.
To protect their investment, they require higher liability limits, mandatory full coverage (comprehensive and collision) and sometimes even gap insurance. This extra protection translates directly into higher premiums for you.
How car insurance works for a leased vehicle
When you lease a car, you are essentially renting it for a fixed period; the lender is the actual owner. Because the leasing company holds the title to a vehicle worth tens of thousands of dollars, they set the insurance rules.
This means you are required to maintain specific coverage levels throughout the lease term. These mandatory requirements include:
- Comprehensive and collision coverage: You must carry full coverage, which covers physical damage to the car itself. This is non-negotiable, as the leasing company needs assurance that their asset will be repaired or replaced after an accident, theft or weather event.
- Higher liability limits: Leasing companies generally require higher liability limits than your state’s minimums. A common requirement is 100/300/50 or even higher. This protects the leasing company against a massive financial lawsuit if you cause a serious, multi-vehicle accident.
- Loss Payee Listing: The lessor (the leasing company) must be listed on your policy as an “additional insured” or “loss payee.” This ensures that any claim payout for vehicle damage goes directly to them.
Why leased car insurance costs more
The primary reason leased car insurance is more expensive is the need to protect the leasing company’s financial interest. Here is a breakdown of the requirements that drive up your premium.
Higher coverage limits are required
State-mandated minimum insurance is rarely enough for a leased vehicle. Leasing companies set financial minimums far above state requirements.
For example, in Florida, the state minimum liability is just $10,000 per person, but a lease agreement might require you to carry $100,000 per person — 10 times the state minimum. Higher coverage limits offer greater protection, but result in a higher premium.
You must carry full coverage
Full coverage — the combination of comprehensive and collision insurance — is mandatory on virtually every lease agreement. While these coverages add cost, they also provide the broadest protection for the car itself, covering everything from minor fender-benders to total losses from fire or vandalism.
Gap or lease payoff coverage
Gap (Guaranteed Asset Protection) insurance covers the difference between the car’s actual cash value (ACV) and the remaining balance on your lease after a total loss.
Since newer cars depreciate quickly, you can easily owe more than the car is worth, even just a few months into the lease. Gap coverage prevents you from having to pay the leasing company thousands of dollars out-of-pocket if the car is totaled. Check your lease agreement: some include gap automatically, but others require you to purchase it as a separate add-on.
Leased cars are often newer (and more expensive)
Because leases are typically for new or late-model cars, the replacement cost is inherently higher than for older, owned vehicles. Insurance companies charge higher premiums to cover the potential expense of replacing a brand-new vehicle.
| Vehicle Age | Average Annual Premium (2025) |
|---|---|
| New (leased/financed) | Higher premium |
| Older (owned) | Lower premium |
Required vs. recommended coverage for leased cars
Use this simple chart to ensure you have the necessary protection on the road.
| Coverage type | Required by lease? | What it covers | Typical limit |
|---|---|---|---|
| Liability | Yes | Damage or injury you cause to others | 100/300/50 (varies) |
| Collision | Yes | Damage to the leased car in a crash | Actual cash value |
| Comprehensive | Yes | Theft, weather, vandalism or non-collision damage | Actual cash value |
| Gap | Often | Remaining balance after total loss | Lease balance |
| Uninsured Motorist | Recommended | Damage/injuries when the at-fault driver has no insurance | State minimum |
| Roadside/OEM Parts | Optional | Repairs and travel assistance | Add-on |
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How to lower insurance costs on a leased car
While leased car insurance is generally more expensive, you are not powerless. As your trusted navigator, here are smart, actionable ways to lower your premiums.
Compare quotes before signing the lease
The single best way to save is to shop around before you drive the new car off the lot. Use quote comparison tools to find the best rate for the exact make and model you plan to lease.
Bundle policies
Look for multi-policy discounts by bundling your auto insurance with your homeowners or renters policy. These discounts can save you up to 25% on your total premium.
Use telematics or safe driver discounts
Many major insurers offer discounts for using a telematics program (like Progressive’s Snapshot or State Farm Drive Safe & Save) that monitors your driving habits. If you’re a safe driver, this can lead to significant savings.
Choose a car that costs less to insure
Before you sign the dotted line, compare insurance costs for similar models. Some cars are statistically more expensive to repair or steal, which drives up premiums. Sometimes the difference in premium between two models can exceed $400 per year.
Ask if gap coverage is already included
Check your lease agreement first. Many manufacturer leases include gap insurance automatically, and you should avoid paying twice by purchasing it as a separate add-on from your insurer.
What happens if you total a leased car?
The moment your leased car is declared a total loss (e.g., from a major accident or catastrophic flood), the claim process is set in motion.
- Payout to lessor: The insurance payout for the car’s actual cash value goes directly to the leasing company, which is the registered owner.
- The gap backstop: If the insurance payout is less than the remaining balance on your lease, your gap coverage kicks in to cover the difference.
- Your remaining responsibility: While gap covers the depreciation shortfall, you may still owe the leasing company for other end-of-lease costs, such as excess mileage or wear-and-tear penalties.
Without gap coverage, drivers can still owe thousands of dollars to the leasing company even after their car is declared a total loss.
Leased vs. financed vs. owned: Insurance cost comparison
Data confirms the difference in premiums based on how you hold the vehicle title.
| Ownership type | Average annual premium | Difference from owned |
|---|---|---|
| Owned vehicle | $2,045 | — |
| Financed vehicle | $2,387 | 17% |
| Leased vehicle | $2,541 | 24% |
Frequently Asked Questions: Leased car insurance
Is car insurance included in my car lease?
No, car insurance is not included in your monthly lease payment. You are responsible for maintaining and paying for your own policy, and you must provide proof of coverage to the leasing company before you can drive the car off the lot.
Can I choose my own insurer for a leased car?
Yes, you have the right to choose any insurer you prefer, as long as the policy meets the minimum coverage requirements set by the leasing company. You should always compare quotes to find the best rate that satisfies your lease agreement.
Do I need gap if it’s already part of the lease?
No. If gap insurance is already written into your lease agreement (sometimes called lease payoff coverage), you do not need to purchase a separate gap policy from your auto insurer. You should only pay for gap once.
What coverage do leasing companies require?
Leasing companies require you to carry full coverage, which means both comprehensive and collision insurance, along with higher-than-minimum Liability limits (often 100/300/100 or higher). They may also require you to have gap coverage.
Is it cheaper to lease or buy when it comes to insurance?
When strictly comparing insurance costs, it is typically cheaper to buy a car outright. The insurance requirements for a leased vehicle — mandatory full coverage and high limits — make the premium more expensive than insurance for a vehicle you own.
Final thoughts
Car insurance for a leased vehicle is almost always more expensive because of mandatory full coverage, higher liability limits and the required addition of the leasing company as a payee. Full coverage isn’t optional; it’s a must to protect both your finances and the leasing company’s asset.
You can reduce costs by comparing quotes, bundling your policies and avoiding duplicate gap coverage.
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