What
if I lease a car?
If you lease a car, you still need to buy your
own auto insurance policy. The auto dealer or bank that is
financing the car will require you to buy collision and comprehensive
coverage. You'll need to buy these coverages in addition to
the others that may be mandatory in your state, such as auto
liability insurance.
- Collision covers the damage to the car from an accident
with another automobile or object.
- Comprehensive covers a loss that is caused by something
other than a collision with another car or object, such
as a fire or theft or collision with a deer.
The leasing company may also require "gap" insurance.
This refers to the fact that if you have an accident and your
leased car is damaged beyond repair or "totaled,"
there's likely to be a difference between the amount that
you still owe the auto dealer and the check you'll get from
your insurance company. That's because the insurance company's
check is based on the car's actual cash value which takes
into account depreciation. The difference between the two
amounts is known as the "gap."
On a leased car, the cost of gap insurance is
generally rolled into the lease payments. You don't actually
buy a gap policy. Generally, the auto dealer buys a master
policy from an insurance company to cover all the cars it
leases and charges you for a "gap waiver." This
means that if your leased car is totaled, you won't have to
pay the dealer the gap amount. Check with the auto dealer
when leasing your car.
If you have an auto loan rather than a lease,
you may want to buy gap insurance to protect yourself from
having to come up with the gap amount if your car is totaled
before you've finished paying for it. Ask your insurance agent
about gap insurance or search the Internet. Gap insurance
may not be available in some states
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