Do I need to insure a leased car?

Car leasing is a great way to wrap your monthly motoring costs into one fixed monthly payment, but insurance is not usually included as part of your lease. This means it’s important to factor in this additional cost when choosing your next car lease. If you’ve already chosen your perfect vehicle, you can head here to get an insurance quote.
Sometimes you’ll find lease deals that do include insurance, with the cost of the cover being added to your monthly rental payments, however, this is uncommon and not something we offer at Auto Trader, so always check your contract to be sure. Driving any car without insurance is illegal, and if you’re caught you’ll receive a fine and points on your licence, perhaps even a driving ban.

When you lease a car, you’ll need to take out a fully comprehensive insurance policy. It is highly unusual for any lesser policies like third-party cover to be listed as acceptable in your lease agreement. If this is the case, it’ll be clearly stated in your lease agreement.
Fully comprehensive cover is something your lease finance company is likely to insist on because the vehicle belongs to them for the duration of your lease. In the event of an accident or damage to the car, they want to be as fully covered as possible.

Most leasing providers will require proof of insurance before your agreed delivery date. Don’t worry though, that doesn’t mean you need the cover to start from the moment your lease is agreed. Just ensure that you’re covered for the length of your contract from at least the day of delivery up to the day your car is collected.

Fully comprehensive insurance will cover damage to your leased car, and if you’re at fault in a collision the other person's vehicle damage is covered too. It also covers injury costs should the worst happen.
• Accidental damage to your vehicle or another person's vehicle. • Personal injury to you or others involved in an accident is also covered. • The policy also covers damage to other people's property resulting from an accident. • Your personal belongings that are damaged or stolen are covered. • Repairs to your windscreen are included in the policy. You’ll also be covered if the car is written off by major damage, or in cases of fire and theft so that you can drive with peace of mind. If you do claim, you’ll only be liable to pay your agreed excess while the insurance company handles the rest of any charges.

Whilst fully comprehensive insurance is the best cover you can get, it doesn’t cover every eventuality. Your policy certificate should be clear about what’s not included, and it’s usually cases where damage is made to the car through some fault of your own outside of an on-road collision. Negligence in cases of theft is usually not covered - you’re responsible for ensuring the vehicle is properly locked and secure with no valuable items on show when you leave it unattended.
If you’re caught driving without an up-to-date licence you’ll be liable for any fines, especially if the car is taken by the authorities and impounded. Standard wear and tear is also not covered by insurance, but some wear is expected during a lease and the BVRLA has guidelines explaining what’s acceptable - e.g. at the end of a typical 3-year lease, you’ve been driving a vehicle for 3 years, so it’s likely to have some minor bumps and scrapes. Find out more about car leasing fair wear and tear.

Insuring a lease car is very similar to insuring any other vehicle, but with a few small differences. Just make sure that once you’ve found the best insurance deal you inform the insurer that it’s for a leased car. It won’t affect the price, but it’s important in case you need to make a claim later.
This is because on a personal lease (on a PCH lease contract) you’ll be the named driver, and the leasing company will be the registered owner. If you’re leasing for a business (BCH) then the insurance should be under the name of the company's director.

As you can imagine, the difference in value between a car that’s brand new compared to the same car with serious damage can be vast. A finance company’s aim is to resell your leased car for its market value when it’s returned. If serious damage is caused and your insurance company won’t cover the full costs to repair (or your vehicle is written off) there will be a gap between what you owe the finance company and what you receive from the insurance company. GAP insurance covers this shortfall by paying that difference, up to a maximum of £20,000.

Most lease providers will offer or inform you about GAP insurance, and some may even offer fully comprehensive car insurance and help you arrange it before delivery. It is not a legal requirement to have GAP insurance, but it’s good peace of mind to be as covered as you can to avoid any unexpected costs down the road.
You should check to see potential charges if your leased vehicle is written off. To ensure that your Gap insurance is adequate, you will need to clearly assess how much you would be charged, as some companies charge between 50% and 100% of the outstanding rentals.

The price of insuring a leased car should be the same as any other car, the only reason it may be more expensive is because you’ll need to get fully comprehensive cover. However, you can always aim to keep costs down, like you would with normal insurance policies, by paying annually rather than monthly, having a decent no-claims bonus, or increasing your voluntary excess amount. You can also choose a less expensive car or one from a lower insurance group to help keep costs down.

If you’re new to car leasing, take a look at our easy-to-understand leasing guides that covers everything from how car leasing works to buying vs leasing and much more. If you’re ready to find your next vehicle, browse our latest car leasing deals.