Leasing a car often means you’ll have lower upfront costs compared to buying a vehicle. However, you’ll need to pay for car insurance whether you lease or buy your next set of wheels.

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Car leasing insurance requirements
When you lease a car, you’ll need to satisfy both your:

State’s minimum car insurance requirements. 

Leasing company’s insurance requirements.

In some cases, this may mean you need to get more insurance if you lease a car instead of buying it outright.

State car insurance requirements
Whether you finance or lease your vehicle, you’ll have to meet your state’s minimum car insurance requirements. Both the amount of coverage and the kind of insurance you’ll need to buy differ by state.

Depending on where you live, required coverage may include:

Bodily injury liability coverage, which pays out if you injure someone else in an at-fault car accident. It also covers lost wages if the injured person can’t work due to the crash.

Property injury liability insurance, which covers damage to another person’s vehicle or property in a crash you caused.

Uninsured and underinsured motorist coverage, which pays out if you get into an accident that you didn’t cause and the other driver doesn’t have enough (or any) coverage to pay for your medical expenses or car repairs.

Medical payments coverage, or MedPay, which covers medical expenses for you and anyone in your car at the time of the crash, whether you caused the accident or not. It can also cover funeral costs after a fatal crash.

Personal injury protection, or PIP, which pays for you and your passengers’ medical expenses resulting from an accident regardless of fault. It can also pay for lost wages, funeral costs, child care and other services you can’t perform due to injuries from the crash.

» MORE: Types of car insurance and what they cover

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Nerdy Tip
Once you know the coverage you want, compare auto insurance rates at least once a year to find the cheapest insurer for you.

Leasing company requirements
Leasing companies often require higher liability limits than state minimums, which will cost more. Beyond the coverage your state requires, you’ll likely need to buy:

Collision coverage, which pays to repair your vehicle after most car crashes.

Comprehensive coverage, which covers damage to your car from most events besides a traffic collision. This includes damage from hail, flooding and even riots.

Gap insurance on a leased car
Depending on your lessor, you may also need gap insurance, which pays out if you total your vehicle. This coverage pays the difference between the value of your vehicle at the time of the crash and how much you owe on your car loan or lease.

For example, let’s say you lease a car for $35,000, and a week later you total the vehicle. The car is worth $33,000 at the time of the crash. Gap insurance will cover the $2,000 difference between your car’s value and the amount you still owe on your lease, which is covered by collision insurance.

🤓
Nerdy Tip
A dealership might automatically include gap insurance when you lease your car, so always check your lease agreement. To avoid paying interest on gap coverage, NerdWallet recommends you purchase gap insurance through an insurer if possible, not your dealership.

Insurance for leased cars at a glance
Coverage type

What it pays for

Liability coverage

Medical costs due to injuries or deaths from an accident you caused, and repair costs for property you damaged.

Uninsured motorist coverage

Medical and repair costs after an accident with an uninsured driver.

Underinsured motorist coverage

Expenses from an accident with a minimally insured driver. This coverage pays once the underinsured driver’s coverage limits have been met.

Collision coverage

Repair expenses from traffic-related accidents, regardless of who is at fault.

Comprehensive coverage

Repair costs from events outside your control — including weather events, hitting an animal while driving, theft and vandalism.

Medical payments coverage

Medical expenses for you and your passengers after an accident regardless of fault.

Personal injury protection insurance

Medical expenses, as well as lost wages, child care, funeral costs and other losses due to an accident regardless of fault.

Gap insurance

The difference between what you owe on your car and your car’s true market value.

About the author: Kayda Norman is a NerdWallet authority on auto insurance. Her work has been featured in The New York Times, The Washington Post and USA Today. Read more