Automobile Insurance for a Leased Car

Automobile Insurance - If you bought your car with bank or lender financing, the lender will require that you insure the automobile to at least the minimum insurance requirements for the state in which you live and drive. 

If you lease your car through a lease-financing plan, you also need a policy. 

In most states, if you do not own the title to your car, either because you financed the purchase through a bank or because you are leasing the car through a leasing company, you must name the bank or lender as an ‘additional insured’ to protect their asset, until such time as you pay it off or return it to them for disposal.

Leasing companies may require you to carry ‘gap’ insurance to cover damage beyond repair (in the event your car is totaled). 

The leasing company wants to recover the total cost of the car, not the depreciated cost, which is what a standard insurance policy will cover. 

So, the ‘gap’ insurance is meant to make up the difference between depreciated value and the money the leasing company has invested in the car.

Many states require collision insurance on your automobile policy until the car is 10 years old (after which you do not have to carry collision).  If you cancel your collision after the car is 10 years old, you will not be covered for body repair work. 

If you continue to carry the collision on a car over 10 years old, you may have to pay a bit more to get the coverage, but if the car is in good condition you may want to continue protection so that you can get repairs if your vehicle sustains major damage – it is cheaper than buying a new car! 

Comprehensive coverage provides reimbursement for loss due to fire or theft or damage to the car from a fallen tree or a deer or animal.

The policy you buy on your automobile is meant to protect you against any financial loss from an accident or theft. 

It includes property, liability and medical coverage to cover your car, the contents of your car, legal liability to others in the event you injure someone else or their car or property, and medical coverage for injuries, lost wages and other expenses.

We should note that when you rent a car for vacation or business, you do need insurance. 

Rental agencies offer insurance, available when you sign the rental contract, but if your automobile insurance covers you while driving other vehicles, you may not need this insurance or additional expense. 

Check with your insurance agent before you rent a car to find out if your policy covers rental vehicles. 

Umbrella policies will cover you for additional amounts of ‘personal liability’ in your home and while you are driving. 

This policy is over and above your regular policy and usually costs about $200 to $400 extra per year for one million dollars of umbrella liability coverage. 

If you have an umbrella policy in addition to your homeowner’s policy, and you need to cover costs from an automobile accident, over and above the value of your vehicle coverage, you may be able to use your umbrella policy to do so.  

Check with your agent to understand the coordination of these benefits and when you can use them.

If you have a teenager who is about to start driving, be prepared for skyrocketing insurance premiums, especially if that teenager is male!

Girls will cost you about 50% more on your policy, and boys will cost as much as 100% more than what you are currently paying. 

That is because teenagers are considered the highest risk group for accidents. 

You can insure your child on YOUR policy, which is less expensive, or on their own policy. 

Before you make this decision, consider the liability issue. 

If the child is on your policy instead of their own, any legal action against your child and his assets can be applied to you as well, since the policy is your responsibility. 

If the child has their own policy, the legal action taken against your teenager is limited to what THEY own, which is usually nothing.  Therefore, the family will not be financially wiped out by litigation. 

Talk to your agent about the laws in your state and ask your agent to shop around to find the best price and coverage for your teenager.

The company with whom you have your auto insurance may not be the best company from whom to purchase insurance for your teenager.

Here is another myth:  My teenager uses his car to delivery auto parts, pizza, Chinese food or other items. 

Because he works for someone else and is not self-employed, our standard automobile insurance policy will cover him. 

This is not true. 

If you are using your car for something other than personal use, you should talk to your insurance agent about extending your coverage to include business use of the automobile or get your son’s employer to provide a car to use for delivery!

Nearly 80% of the people buying automobile insurance buy a comprehensive policy and about 75% buy collision. 

The National Association of Insurance Commissioners reports that from 1999 to 2003 the average cost of car insurance rose from $685 per year to $820.00.

There are numerous factors that influence the price you will pay for your personal policy:

Ø      The number of miles you drive each year and the daily mileage you drive back and forth to work.

Ø      Your driving record and the number of citations, tickets, violations and accidents you have had in the past.

Ø      Where you live, the traffic congestion and frequency of accident occurrences in that area, the condition of the roads, traffic patterns, lights, etc.

Ø      Your age and the age of the drivers on your policy.

Ø      The car you drive, the frequency of auto theft for that kind of car, the security systems on your car, the safety devices on your car (air bags, seat belts), and the age of your car.

Ø      The amount of coverage and the type of policy you want, and whether you are planning to get excess coverage.

You should check your policy and coverage whenever you have a major change in your life, the cars you own or the drivers on your policy. 

When you get married, divorced, add a teenager to your policy or make other changes like buying a new car or disposing of a car, be sure you check your policy so that it is up to date and will cover any new or changing needs you have.