The auto insurance coverage you need for your car depends on whether you bought or leased the car. Insurance varies for both forms of car ownership because a third party is interested in a leased car. Below are three things you should know about insurance coverage for a leased car.

1. Coverage Is Mandatory

You cannot drive off the lot with a leased car if you don't have insurance coverage. Remember, you don't own the car you lease; the leasing company retains the car's ownership. The leasing company stands to lose money if something happens to the car and you cannot repair it.

Ordinarily, a leasing company can repossess its car to protect its investment if you default on your payments. That might not be possible if someone steals the car or you total the car in a crash. Leasing companies insist on insurance coverage to avoid such misfortunes.

2. The Leasing Company Determines the Necessary Coverage 

Secondly, the leasing company also determines the coverage you must carry. Below are some aspects of coverage that leasing companies usually control.

Coverage Types

Your leasing company determines additional coverage to carry other than the liability coverage that the government requires. For example, most leasing companies require comprehensive collision coverage. Collision coverage covers accidents with other cars or objects. Comprehensive coverage covers damage due to non-collision events.

Some leasing companies also require gap insurance. Gap insurance covers the difference between the value of a car and the amount you owe for it. A leasing company will likely require gap insurance if you lease an expensive car.

Policy Limits

State law determines minimum liability insurance, but the leasing company may specify a different minimum. The leasing company may also specify minimum coverage limits for other forms of coverage, such as comprehensive, collision, and gap insurance.

Deductible

The deductible is the amount you must pay before the insurance company settles your claim in case of damage or theft. Your leasing company may specify the maximum deductible to carry to minimize risk if something happens to the car.

3. You Must List the Leasing Company on the Policy

Lastly, you must add the leasing company to the insurance policy as one of the car owners. That is the only way the leasing company will get insurance compensation in case something damages the car or you lose it to theft.

Hopefully, you have adequate coverage for your leased car. Contact your insurance agent or company if you are unsure of your coverage's adequacy.

To learn more about auto insurance, contact an agent today.