Almost every state requires auto insurance. In addition, there are certain amounts of coverage that some drivers prefer when choosing to buy or lease their car. If you’re looking to cover your vehicle, here are the insurance benefits for protecting your newest asset:
Leasing a Vehicle? Insurance the Law Requires:
Comprehensive Coverage – When leasing a vehicle, you don’t technically own it; the leasing company does. Take all precautions as for not paying the damage out of pocket. Therefore, you must carry higher liability limits than the state minimum requires. Comprehensive coverage includes losses that are caused by natural disasters, theft, collisions with deer or other animals – basically anything that isn’t a collision with another vehicle or object.
Collision Coverage – To cover all your bases (no pun intended), you must include coverage for collisions with other vehicles or objects for a leased vehicle. A totaled vehicle under collision coverage may not pay for the amount of damage.
Fortunately, there’s “gap” insurance. This is generally rolled into the payments you make toward your leased car. These payments will cover the difference (or “gap”) you owe and the insurance company pays out.
Most lease payments allocate funds for gap insurance, but it’s a good idea to check with your leasing company that you have all the coverage your leased vehicle needs.
Buying a Vehicle? Insurance the Law Requires:
Liability Coverage* – Most states (again, not NH), mandate drivers carry liability coverage. This type of insurance will help you pay for people and property damages.
The average auto liability claim for property damage is $3,231 – far less than the price of liability coverage per year, so it’s a benefit to you, your wallet, and the outside world to get this insurance policy. Besides, what choice do you have? It’s mandatory.
Underinsured Motorist Coverage* – Investing in underinsured motorist coverage may be helpful; especially in the event of having an accident with an insurance-less driver. This may also be mandatory, depending on where you live.
But in any case, if you’re involved in an auto accident and the damage exceeds the amount the other driver’s insurance policy can cover, uninsured motorist coverage may help pay for the remaining medical bills or repair costs so you don’t have to.
* Both liability and uninsured motorist coverage is also mandatory for leased cars; required by the leasing companies.
Bottom line is, you’ll definitely be need more coverage if you lease a vehicle, because the law and leasing companies have separate but mandatory requirements. Buying a vehicle gives you some flexibility, because not all types of coverage are required in every state for vehicles you own.