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A guide to car leasing and insurance

March 22, 2023

Car leasing and insurance

Car leasing has many advantages, offering you a chance to get your hands on the latest cars for a monthly fee. It also has some significant drawbacks, such as being tied into a lengthy contract, typically for 2 - 4 years. But with so many different options, it can be hard to know what exactly you get with a car lease.

When we refer to car leasing we often mean PCH (Personal Contract Hire) or PCP (Personal Contract Purchase). The term is used as more of a catch-all to include both business and personal leases. 

There are several important things you need to know when it comes to car leasing and where this leaves you with insurance. In this guide, we’ll aim to answer some of your questions and give you advice on what to look out for, as well as highlighting a viable alternative - all-inclusive car subscriptions.

Does car leasing include insurance?

Insurance can be a very complex matter, so it’s important to understand why you need it, and what’s right for you. Every vehicle on UK roads requires insurance by law, and car leasing is by no means different. 

In most cases, car leasing does not include insurance. However, it is a requirement that the lessee (the person leasing the car) has insurance coverage for the duration of the lease. This is because the leasing company retains ownership of the vehicle, and the lessee is responsible for any damages to the car while it is in their possession.

If you are considering leasing a car, you’ll need to arrange your own insurance coverage. This can be done through your existing insurance provider, or you can shop around for a new policy. Be sure to check with the leasing company to find out their specific insurance requirements, as they may have certain minimum coverage amounts that you will need to meet.

Some car leasing companies provide something called ‘complete care’, or ‘total care’ packages, which include insurance in the monthly payments. These packages typically cover the following: 

  • Comprehensive vehicle insurance for the leased vehicle with cover for repairs in an accident and fire or theft.
  • Breakdown cover.
  • All routine maintenance – tyres, brakes, exhaust, wipers etc.
  • Total Loss Protection – helps prevent financial shortfall if the vehicle is written off.
  • Extended cover to family members if they’re using the car (provided the leasing company agrees to them using it).

Naturally, by taking out these packages, you can expect to see your complete cost per month increase. It’s always wise to compare the cost of these packages with standard insurance quotes. 

What insurance policy is needed for car leasing?

Whatever type of lease you take out, you’re leasing from a company which treats these vehicles as an asset, and for that reason, you will require a fully-comprehensive insurance policy. 

Fully-comprehensive is generally on the pricier range of insurance policies, but it also provides the greatest protection. Also known as a ‘fully comp’ policy, it provides cover for damage to other people and their cars as well as the driver and leased vehicle.

In the worst case scenario - writing off your vehicle in an accident - fully-comprehensive insurance will cover the cost or value of the vehicle at the time of the accident. Fully-comprehensive insurance covers:

  • Insurance cover for damage to other people’s property
  • Insurance cover for passengers if they get injured
  • Insurance cover for the driver and their leased vehicle
  • Windscreen repair
  • Provision of a courtesy car if the leased vehicle is being repaired

When you take out your fully-comprehensive insurance, it’s similar to if you were paying for car insurance on an owned vehicle, making the process quick and easy. However, there are a few things you need to do in order to make sure you are properly insured:

  • For personal car leasing: the name on the lease agreement should be the main insurance policyholder.
  • For business car leasing (business contract hire): either the company or the Director should be the policyholder, and this name should appear on insurance documentation.

When taking out the car insurance you must inform the insurance company that the cover will be for a leased vehicle. You may find that some insurers will not cover leased cars, however, there are specialist car leasing company insurers who you can approach for quotes and take cover with. 

Other insurance types include third party insurance. This is the minimum requirement to drive a vehicle in the UK and traditionally covers fire, theft, vandalism and third party liability but is not comprehensive and, as previously stated, many leasing companies will not give you the vehicle if you don’t have fully comprehensive.

GAP insurance 

Finally, you may also have the opportunity to take out GAP insurance. This is not a legal requirement in the UK but, depending on where you are getting your leased vehicle, it may be recommended in some of the leasing contracts. 

GAP insurance is an acronym for Guaranteed Asset Protection. Effectively, GAP insurance covers any outstanding finance on your new vehicle if it’s written off or stolen. While this is the worst-case scenario, it’s not completely out of the question. It covers the ‘gap’ between what your car insurer pays and the actual value of your car in the event of a write-off.

Naturally, in the event of the car being stolen, you’ll need to report this, get a crime number and then speak to the car leasing company and insurance provider to make them aware.

The insurer and the lease company will work together to find a settlement figure. If the payout offered doesn’t cover the amount required, it will be your responsibility to settle the outstanding finance for the vehicle.

What’s not included in the insurance policy?

When you’re taking out your insurance policy for your leased vehicle, you’ll need to pass certain driver eligibility requirements.  This can include things such as: 

  • Be aged 21-70.
  • Hold a full UK driving licence which has been valid for at least one year.
  • Have no more than six points on your driving licence.
  • Have no more than two at-fault claims in the last two years (excluding those recovered from a third party).
  • Not have been advised to stop driving by the DVLA or a medical practitioner due to medical conditions.
  • Be the lessee or the lessee's spouse or partner and immediate family i.e. parents, siblings or children (For Personal Contract Hire).
  • Be an employee of the company or their spouse, partner or immediate family i.e. parents, siblings or children (For Contract Hire).

You’ll need to check these terms according to the vehicle you’re driving. For example, higher value vehicles and even some newer models including electric cars require a little more from the driver such as being aged between 25 - 70, and having a certain income or credit check may also be taken into consideration. 

It’s important to be aware of these requirements and to speak to your leasing agents when doing so. 

Another important aspect of car insurance for car leasing is that you can be liable to lose your cover or have it voided for instances such as the following: 

  • The driver was under the influence of alcohol or drugs.
  • There is general wear and tear to the vehicle that isn’t covered.
  • The wrong fuel (e.g. diesel into a petrol car) is used.

Why you should consider a car subscription

If you’re looking to lease a car which includes insurance in the monthly fee, a car subscription is worth considering.

At Drive Fuze, our monthly car subscriptions are all-inclusive. This means your monthly payments cover both your use of the vehicle and associated costs, including fully-comprehensive insurance, tax, servicing, maintenance, and breakdown cover. All of this is factored into just one fixed monthly payment with no long-term commitment - giving you the freedom and flexibility that a traditional lease can’t offer.  

Take a look at our range of cars and sign up for your car subscription today. It’s the first step in experiencing the freedom of a Drive Fuze car subscription.