Car Insurance When Leasing

Leasing a new vehicle is basically renting it for a predetermined amount of time. Most leases last between two and four years. You make monthly payments and then return or purchase the vehicle at the end of the lease term.

Car lease contracts come with annual mileage limits, which usually range from 12,000 to 15,000 miles. Exceeding these limits will result in extra charges at the end of the lease, or you can pay an additional fee for higher limits during your lease period.

Pros and Cons of Leasing a Car

There are some advantages and disadvantages that come with leasing a new vehicle. Here are a few things to consider as you weigh buying a car versus leasing one:

Car insurance when leasing comes with a few extra requirements, but it isn’t radically different from the coverage you need when you buy a new vehicle. You’ll need to meet your state minimum coverage limits as well as any requirements set out by your leasing company.

Every state has its own minimum property damage liability and bodily injury liability coverage requirements. These types of insurance pay other people’s property damage costs and medical expenses when you’re at fault for an accident. Some leasing companies may require you to carry liability insurance that goes beyond state mandates, including uninsured and underinsured motorist coverage.

Additional Coverage for Leased Vehicles

When it comes to coverage for leased vehicles, the lessor needs protection for its investment as well. Since the leasing company technically owns the vehicle, you will need to list it as an additional insured party and loss payee. Most leasing companies will require you to carry collision and comprehensive coverage in addition to the state-required coverage. The lessor then receives any insurance payout for covered damage to the vehicle.

Here are some examples of coverage your lease agreement may require:

• Collision insurance covers damage to your vehicle from accidents no matter who is at fault. 
• Comprehensive coverage protects you from damage caused by natural disasters, theft, vandalism, falling objects and other incidents unrelated to collisions.
• Gap insurance may also be required by your leasing company. This coverage pays the difference between the amount owed and the actual value of a car in the event of a covered total loss. If you need gap insurance, you might have the option to pay for gap coverage as a one-time upfront fee rather than adding it to your insurance policy.

When searching for car insurance coverage for your leased vehicle, you’ll likely need a full coverage policy that includes liability coverage as well as collision and comprehensive insurance. The national average cost of insurance for a full coverage policy is $2,008 per year or $167 per month.

However, the rate you pay for a policy varies widely based on the provider you choose, the state where you live, your driving history and several other factors.

Whether you decide to lease or buy a new car, you’ve got plenty of options when it comes to quality auto coverage. Here are our top insurance provider picks based on coverage options, pricing and customer satisfaction:

*Ratings are determined by our editorial review team. Learn more about our scoring methodology below.

#1 State Farm: Best Customer Experience

Better Business Bureau (BBB) Rating: A+

AM Best Financial Strength Rating: A++

State Farm offers a variety of discounts, including usage-based savings through two different programs. The company’s Drive Safe & Save™ program rewards safe driving habits for customers in 47 states — California, Massachusetts and Rhode Island are the exceptions. The Steer Clear^® program is designed to help young drivers under the age of 25 develop good driving habits. State Farm also ranks highly for customer satisfaction in many regions in the J.D. Power 2023 U.S. Auto Insurance Study℠.

Keep reading: State Farm insurance review

#2 USAA: Best for Military Members

BBB Rating: Not rated

AM Best Financial Strength Rating: A++

USAA auto insurance is only available to active military, veterans and their families. If you qualify for the company’s plans, you’ll get access to great coverage at affordable rates. The high marks USAA receives from the BBB and AM Best indicate the company’s strong industry reputation. The company also often receives the highest customer satisfaction score among all insurance providers in many J.D. Power studies.

Keep reading: USAA insurance review

#3 Geico: Best for Budget-Conscious Drivers

BBB Rating: A+

AM Best Financial Strength Rating: A++

Geico is a great choice for many drivers due to its wide selection of coverage options and cheap car insurance rates. According to our rate estimates, 35-year-old drivers with good credit and clean driving records pay about $1,596 per year on average for full coverage from Geico. At about 26% below the national average, this is one of the lowest rates for a nationwide provider. Geico also offers a range of discounts that can lower monthly payments even more, including savings for safe drivers, good students and drivers who bundle policies.

Keep reading: Geico insurance review

If you opt to lease a vehicle, you’ll have many options for affordable full coverage policies to meet your leasing company’s requirements. Our team recommends reaching out to multiple providers to get free car insurance quotes and compare your options.

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.

Here are the factors our ratings take into account:

• Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
• Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
• Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
• Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
• Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.

Our credentials:

• 800 hours researched
• 45 companies reviewed
• 8,500+ consumers surveyed

*Data accurate at time of publication.