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Does car leasing include insurance?

April 30, 2024

Does car leasing include insurance?

Car insurance is a hot topic at the moment thanks to rising costs, so it’s likely to be one of the top things on your mind when you’re thinking about your next car. If you’re exploring the possibility of leasing a car instead of buying one outright, you might be wondering whether car insurance will be included in your lease agreement and wrapped up in your monthly payments – something that can be both convenient and cost-effective. It’s important to understand insurance provisions clearly before agreeing to a lease, so in this article, we’re looking at this subject in more detail.

Understanding insurance coverage in car leasing

Before we go any further, let’s have a quick recap on what we mean by ‘car leasing’. These are long-term car rental agreements where you sign a contract – typically for two to four years – make set monthly payments, and then effectively treat the car as if it were your own (with a few restrictions!). There are different types of leasing arrangements, and we’ve covered this in more detail in our car leasing article.

While most standard car lease agreements don’t include insurance, some do. Different types of car insurance may be included in a car lease, and the main ones are:

  • Comprehensive insurance: this provides cover for damage sustained to your lease car, for example when you’re involved in an accident
  • Third-party liability insurance: this gives you protection against claims from other people, such as for damage you’ve done to their cars while in your lease car
  • Gap insurance: this covers you for the difference between the value of your lease car and the balance you have left on your lease if your car is stolen or written off

So is it worth opting for a car lease that includes insurance instead of taking out an insurance policy separately? Let’s look at the advantages and drawbacks.

Pros and cons of insurance inclusion in car leasing

Perhaps the biggest plus of having insurance rolled into your monthly car lease payments is the convenience. It makes things much simpler when you don’t have to think about a separate insurance payment going out, and you don’t have to worry about when your policy is due for renewal. 

When you first get the car, you won’t have to go through the rigmarole of shopping around for insurance quotes, and you’ll keep paying the same amount, so you won’t have to worry about your premium going up each year. That means there are potential savings compared to the cost of purchasing a separate insurance policy, so it can be a cost-effective option. What’s more, with no third-party insurer involved, it can also speed up the process of repairing your car if you’ve been involved in an accident, as there’s no waiting for approval to start the work.

There are some possible drawbacks to be aware of, in particular the fact that your insurance cover may be tied to the terms and restrictions of your lease. As we’re about to come on to, you may find that the coverage and add-on options are limited, making it harder to get a level of insurance coverage that suits your day-to-day needs and circumstances.

Factors influencing insurance coverage in car leases

It’s important to note that, as we mentioned earlier, many (if not most) standard car lease agreements don’t automatically include insurance. This is normally something you need to arrange yourself to start from the day you take responsibility for the car. However, many leasing providers do offer insurance as an upgrade and this can often be rolled into a higher monthly payment.

That said, it’s worth keeping in mind that several factors may affect the level of insurance coverage your contract will offer. For example, the requirements of your insurance policy may vary depending on where you’re based, and depending on the make, model and value of the car. 

It’s important to read the small print of any lease agreement carefully before signing it, making sure you understand the terms, coverage and limitations of your insurance coverage if you do choose this route. It also makes sense to check out price comparison sites for alternative comprehensive car insurance arrangements, checking out how these compare like-for-like with the coverage you could potentially get as part of your lease.

Is there a better option than a car lease that includes insurance?

A car lease isn’t the only model of car ‘usership’ that can offer comprehensive car insurance included in the monthly payments. Another option is a car subscription, which not only includes insurance but also all the other costs associated with running a car, such as servicing, maintenance, breakdown cover, tax and fair wear and tear on tyres. If the idea of a car lease with insurance included appeals to you because it keeps things simple, then an all-inclusive car subscription could be an even better option for you. 

With a car subscription, not only do you get the benefit of easy budgeting (unlike car leasing, all you have to add on top of your monthly payments is fuel or charging), but you’ll also have a much greater degree of flexibility than you would with a traditional car lease. Instead of being tied into two to four years of monthly payments, you’ll instead only commit to one month at a time. Crucially, you can cancel this at any time – great if your circumstances and needs change. You can find out more about how our car subscriptions work, and browse our site to take a look at the car makes and models we have available.

To sum up, insurance isn’t usually included in a standard car lease agreement, so it’s something you’ll either need to arrange separately or add to your contract. There are advantages to having it included in your lease, but there are some limitations to be aware of as well. If you’re unsure, consult your leasing provider or speak to an insurance expert, as they’ll be able to advise you on the right insurance for your specific circumstances.