If you’re looking to lease a car, you may have questions about insurance policies and who is responsible for insuring the leased vehicle. In this post, we’ll look at what type of insurance you need, how much it costs to insure a leased car and how you can lower the cost of your insurance premium.
Standard insurance isn’t usually included in a car leasing contract, meaning it’s the responsibility of the individual or the business that leases the vehicle to organise cover. Car insurance is a legal requirement in the UK and it applies to you whether you own, finance or lease a vehicle.
Third-party insurance is the legal minimum requirement to drive in the UK. It covers damage to any other vehicle, person or property that may result from an accident that is deemed your fault. However, leasing contracts require you to take out a fully comprehensive insurance policy for your lease vehicle. While third-party policies only cover damage to others, comprehensive policies cover damage to your car as well.
If you were involved in an accident without comprehensive insurance, you would have to pay the lease company back for the full value of the car. You can also take out Guaranteed Asset Protection (GAP) insurance, which is an optional policy that covers the difference between the current market value of the car and the amount you owe for the lease agreement.
You don’t need gap insurance on a leased car, as it’s not a legal requirement and is designed to work alongside your comprehensive policy. However, some leasing contracts may suggest that you take out gap insurance to ensure greater protection against damage or theft.
Setting up lease car insurance can be done in the same way as regular motor insurance. You’ll need to inform your insurer that the finance company is the registered owner of the vehicle, not you. While this will have no impact on the price, it’s important to make sure the insurance provider knows that you’re looking for a quote on a lease vehicle. Your car needs to be insured from the day it’s delivered, and it must stay covered until you return it to the finance provider.
A common misconception is that insurance is higher on leased cars as you must have fully comprehensive cover. This isn’t always the case. For an experienced driver, comprehensive cover can be considerably cheaper than third-party insurance. Cars are categorised into fifty insurance groups from cheapest to most expensive, with upmarket vehicles generally costing more to insure. However, there are other factors too. The cost of car insurance depends on the type of vehicle you lease, your driving record, how you’ll use the car, your credit rating and the type of policy you choose.
Car insurance can be expensive, but there are methods you can utilise to lower the cost of your premium. Your vehicle’s size, type and engine size will all impact your insurance cost, as well as the provider you choose. Some of the ways you can lower your insurance premium are:
Choosing the right insurance policy for your lease car can be difficult, particularly if you’re a new driver. You’ll need to take out comprehensive insurance when you lease a car so it pays to shop around, comparing prices from different insurers before your commit.
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