Introduction

Leasing a car is a popular method for getting behind the wheel of a new vehicle here in the UK. With leasing, you never actually own the car, but through an initial deposit and clear monthly instalments, this method can be great for drivers who like to keep track of their finances while gaining access to a new car. 

Although leasing can bring some motoring costs together into one monthly payment, drivers still need to arrange their own insurance to drive legally. Maintenance and servicing may be added to a lease, but these are usually optional extras rather than standard features of most lease deals. Is it different to insuring a privately-owned vehicle, though, and is there anything else you need to know? We’ll be finding out in this article.  

The non-negotiable: fully comprehensive insurance 

Unlike a privately-owned car, where third-party insurance is the minimum requirement for insurance cover, things are slightly different for a leased vehicle. When leasing, you’ll need to have a fully comprehensive insurance policy in place. This is because for its entire time during the leasing agreement, the car is owned by the lease provider and in order to protect this valuable asset, it’ll need to be covered by fully comprehensive insurance.  

Fully comprehensive insurance gives the most complete level of cover for a vehicle. It’ll cover the car in case of accidental damage, theft or fire and, in the event of a complete write-off, will mean that the leasing provider can still recoup the full value of the vehicle. Plus, since leasing vehicles are usually brand-new, it protects the driver from high repair bills should an accident occur.  

Key insurance considerations for lease cars 

Some specific details will be included in your leasing agreement that are worth being aware of. Let’s check them out.  

Agreed value clause 

An agreed value is a pre-set valuation for the vehicle included as part of the lease and that value will remain the same for the duration. With an agreed value clause, the insurance provider will be contractually obliged to pay out for that agreed price, ensuring that the driver is covered to the full value of the car.  

In contrast, the ‘market value’ fluctuates over time as the car depreciates or gains value. Agreed value insurance policies are often more expensive than a market value one, since they cover a car for more money even though it may have lost some of its value.  

The vast majority of insurance policies that you’ll find will be market value ones. 

Gap insurance 

Gap insurance is usually taken out on lease vehicles. It can help to make up the shortfall between what an insurer will pay out in the event of a write-off situation and the remaining value left on a lease agreement.  

Essentially, GAP insurance will mean that a driver isn’t left out of pocket or facing a large bill in order to pay off the remaining balance of a lease agreement should the vehicle be written off and the insurance payout fail to make up the rest of the lease amount. Most leasing agreements work off a final residual sale value with the total cost of the car being calculated after depreciation has been taken into account.  

Cover duration  

When leasing a vehicle, you’ll have to make sure that you have a fully comprehensive insurance policy in place for the entirety of the agreement. You’ll have to double-check that your insurance policy lines up with the agreement, or you’ll have to make sure that you renew on time to remain covered while still leasing a car.  

What happens in case of a claim or write-off? 

Being involved in an accident is never nice. But as long as everyone involved is safe and well, there’s no reason to stress about the process following if you’ve got your insurance in place. 

If your car needs repair, your first port of call should be your leasing provider. You may be able to speak to them about approved repair centres - though you may need to organise this yourself. Contact your insurer after this and provide as much information as you can about the incident, where it occurred and the extent of the damage. The insurance provider can then advise you on the next steps and where to go if for repairs.  

If, however, your car is declared a write-off in the incident, things are slightly different. In this instance, the lease agreement will end and your insurer will need to pay out the value of the vehicle to the leasing provider. If this matches the leasing provider’s value, then there’s nothing to worry about. However, if there’s a shortfall, then you may need to match this out of your own pocket or use your GAP insurance cover if you have it in place.  

Costs and factors affecting premiums 

Several factors can affect how much you’ll pay for an insurance premium. These factors include: 

• Age 
• Mileage 
• Location 
• Occupation 
• Credit score 
• No-claims bonus 
• Additional drivers  

Conclusion 

Insurance is something that you’ll need to have in place when leasing a car but, fortunately, organising it doesn’t have to be stressful. It’s always worth getting insurance quotes before undertaking a new leasing agreement, too, and here at AA Insurance, we could help to make sure you find the right cover for you.