powering smart financial decisions

Is including insurance in a long-term car lease cheaper than insuring the car separately?

Is including insurance in a long-term car lease cheaper than insuring the car separately?

Leasing a car can be useful for many reasons, such as being unsure about how much driving you need to do or driving only for business purposes. Typically, a car lease can be the middle ground between renting the car for a weekend or a holiday and owning the car outright. It can also help you decide if you want to own a car. However, depending on the leasing company and the kind of car lease you choose, you may have to cover the cost of insuring the car yourself. While some dealers may include car insurance with the lease, not all do. You should also check if you find the coverage adequate and if the terms offered are suitable for your needs. You can also choose to lease the car and buy insurance separately, although that is likely to cost you more. 

How much can a long-term car lease with insurance included cost?

Whether you own a car or lease it, the cost of car insurance depends on several factors. These include your age, gender, driving experience, the type of car you own, and the amount of driving you expect to do. Car insurance for a leased car tends to cost more when purchased separately from the lease agreement. This is due to two factors: a leased car is probably a newer model that costs more to repair or replace, and younger people are more likely to lease a car. The alternative would be to find a leasing company that includes insurance with their long-term car lease, although that also needs some scrutiny.

For instance, the leasing company may include only Compulsory Third-Party (CTP) insurance, which is mandatory but also the minimum coverage, in their lease. You would be expected to purchase additional coverage for your liability in an accident, or accidents involving uninsured motorists or property damage. Also, the relatively lower age of a leased car could mean that the vehicle’s warranty is still valid and covers some kinds of damage to the vehicle. Considering all this, you may want to compare the cost of buying add-on insurance from the dealer vs the cost of buying insurance elsewhere. This will also allow you to check the terms of coverage offered by different insurers for leased cars. CTP insurances are the most basic and cheapest cover and are included in all car leases. You may, however, want or need more expensive comprehensive coverage for newer or more expensive cars.

What options do I have in terms of getting insurance cover for my leased car?

You might want to try to find a leasing company that either includes insurance with the long-term car lease or offers add-on coverage. However, if you can’t, you can shop around to buy insurance separately. If you do have to buy insurance separately, you could look for an insurer specialising in policies for leased cars or a provider who doesn’t factor in who owns the car when calculating premiums. Remember that you may have to continue making the car lease payments even if you’re involved in an accident and cannot use the car. You may also need the insurance policy to cover the cost of a hire car as well.

Some insurance providers may offer car lease protection coverage, which takes care of leasing and related costs if you cannot make the payments after losing your job or totalling the car in an accident. You should check the details of the insurance product offered and compare the coverage and costs for similar policies. This way, you ensure your leased car is insured as needed as per either the leasing terms or your satisfaction.

Did you find this helpful? Why not share this article?

This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.



Related articles