Yes, you absolutely must have insurance on a leased car. In fact, it's not just a recommendation—it's a legal and contractual requirement. When you lease a vehicle, you do not own it; the leasing company (the lessor) does. They have a significant financial interest in protecting their asset from damage or loss. Therefore, the contract you sign will mandate that you maintain a specific level of auto insurance coverage for the entire lease term.
The required coverage typically goes far beyond your state's minimum liability requirements. Leasing companies almost always require:
- Comprehensive and Collision Coverage: These cover damage to the leased car itself. Collision pays for repairs from an accident, while comprehensive covers events like theft, vandalism, or weather damage.
- High Coverage Limits: Lessors often specify high limits for liability, such as 100/300/100. This means $100,000 for bodily injury per person, $300,000 per accident, and $100,000 for property damage.
- Gap Insurance: This is critically important for a lease. If the car is totaled, your standard insurance pays the vehicle's actual cash value, which may be less than the remaining lease payoff amount. Gap insurance covers that difference, protecting you from a major financial loss. It's often included in the lease agreement, but you should always verify.
Failing to maintain the required insurance is a breach of contract. The leasing company may purchase a policy on your behalf (called force-placed insurance) and bill you for it, which is often significantly more expensive than one you'd find yourself. In severe cases, they could even repossess the vehicle.
| Insurance Requirement | Typical State Minimum (Example) | Typical Leasing Company Requirement | Key Reason for Difference |
|---|
| Bodily Injury Liability | 25/50 (e.g., California) | 100/300 | Protects the leasing company's asset from high-value lawsuits. |
| Property Damage Liability | $15,000 | $100,000 | Covers damage to other vehicles or property. |
| Comprehensive & Collision | Optional | Mandatory | Directly protects the physical car, which the lessor owns. |
| Deductible | Varies by policy | Often capped at $1,000 | Ensures you can afford repairs, preventing neglect. |
| Gap Coverage | Not applicable | Mandatory (often included) | Covers the "gap" between the car's value and the lease payoff if totaled. |
