Leasing Car Insurance: 6 Tips You Need To Know To Save Cash

Depending on your financial situation, it can make sense to lease a car instead of buying it outright. However, many people forget to factor in the cost of insurance when considering whether to buy or lease.

Read: How To Build Your Savings From Scratch

Keep reading to learn more about the different factors of leasing car insurance and how to use this knowledge to lower your insurance costs.

1. Understand Your Car Leasing Insurance Requirements

Before you lease a car, you must satisfy both the leasing company’s and the state’s insurance requirements. Unfortunately, the state and leasing companies tend to have different requirements. This makes it even more challenging to ensure you’re using your car and insurance correctly.

While requirements may differ depending on where you live, many states require:

• Bodily injury liability coverage

• Property injury liability insurance

• Uninsured and underinsured motorist coverage

• Medical payments coverage

• Personal injury protection

In addition to these types of coverage, leasing companies often require that you purchase:

• Collision coverage to pay for repairs after car accidents

• Comprehensive coverage for other types of damage besides car accidents

Keep in mind that leasing companies often set higher liability limits than the minimum limits set by the state. This can increase the total cost of your leased car insurance.

2. Weigh the Pros and Cons of Full vs. Partial Coverage

You may be tempted to save money by purchasing a minimum amount of coverage. However, make sure you consider whether you can afford out-of-pocket payments for damages that aren’t covered by partial policies.

Fully comprehensive policies usually cover damage to other vehicles and injuries to yourself or other parties. They can even cover damages when it’s not clear whether you were at fault or not. They also pay for smaller things like windshield repair, courtesy cars and breakdown coverage.

While it may be more expensive upfront, fully comprehensive coverage will pay for itself if you run into unexpected issues down the road.

3. Save Money by Paying for Your Premium Up Front

Most car insurance policies can be paid upfront or monthly. While monthly payments break down the full payment into smaller amounts, they cost more in the long run due to added interest. If you can afford it, try saving up beforehand to pay the total premium upfront. This strategy will save you more money that you can put into savings or use for other necessary expenses.

4. Increase Your Excess To Reduce Your Premium

An excess is the amount you pay when you file an insurance claim. This amount is set before you sign your leasing car insurance policy.

If you increase your excess, you can lower your premium. That’s because increasing your excess shifts some of the risk from the insurer to you, as they’ll have to pay out less if you file a claim.

It sounds like a no-brainer, but keep in mind that this strategy will likely only help you save money if you never file a claim. If you end up needing to file several claims, you may end up paying a much higher amount than the money you saved on your premium.

5. Check Whether Your Policy Includes Gap Insurance

Gap insurance pays the difference between the value of your car at the time of a serious crash and the amount still owed on the lease.

For instance, let’s say you leased a car for $42,000. The following month, you total the car when it’s worth $39,000. Luckily, your comprehensive insurance policy included gap insurance, which covers the $3,000 difference.

Dealerships may include gap insurance in their leases, but it might be better to purchase it through your insurance provider to avoid interest fees. Always review your lease agreements and insurance policies to ensure you’re not paying extra charges.

6. Transfer Your No-Claims Bonus to Your Leased Car

If you already have a no-claims bonus on your current car insurance, you can usually transfer it to the lease car insurance policy. However, be aware that this may not always apply if you switch insurance providers before the year is up.

Whether you’re eligible for a no-claims bonus or not, there are several other discounts and bonuses for drivers to look into when shopping for leasing car insurance.

Final Thoughts

When you’re purchasing insurance for your leased car, there are many factors to consider. Once you understand the requirements, you can try different ways to save money on your insurance premium by following the advice listed above and avoiding bad habits that can increase your payments.

FAQ

Here are the answers to some of the most frequently asked questions regarding leased car insurance.

• What are the three cons of leasing a car?

  • Drawbacks to leasing cars include complicated lease agreements, mileage restrictions and the simple fact that you don't own the car at the end of the lease.

• Does leasing a car build credit?

  • Yes, leasing a car can help you build your credit, as long as you make your payments on time.

This article originally appeared on GOBankingRates.com: Leasing Car Insurance: 6 Tips You Need To Know To Save Cash