As part of your lease contract, you must carry full-coverage insurance for the entire period of the lease. In fact, you must provide proof of this coverage before you leave the dealership in your new car. Although your salesperson will work with you to set up your coverage and require proof, it is your responsibility to consistently carry the full-coverage policy.
Insurance Coverage
A full-coverage insurance policy covers repairs to your car in the event of an accident or for the vehicle's total loss. It is the most expensive of insurance policies (as compared with a minimum-liability or comprehensive policy), as the insurance company pays for the market value of your vehicle in the event of a total loss. Lenders have different requirements, such as your maximum deductible and coverage limits. Check with your new-car salesperson for limits required by the leasing company.
GAP Insurance
Guaranteed asset protection (GAP) insurance is also a requirement for leased vehicles. It covers the gap between the value and the actual vehicle payoff amount. However, not all insurance companies offer this coverage. Still, the protection is mandatory and you may have to buy it separately through the dealer. In that case, it becomes a portion of your lease payment. Insurance companies pay for the vehicle's determined market value, which does not include the bank's payoff amount. It generally takes about about three years for your vehicle's buyout amount and market value to equal, as depreciation is highest when a vehicle is new.
Insurance Reporting
Your insurance company reports your coverage, or lack thereof, to both your state's motor vehicle office and lender. Your bank is listed as the policy loss-payee, so your insurance company automatically notifies the lender at the time of policy renewal or cancellation. If you do not maintain your policy, the bank has the right to add a policy to your vehicle to protect itself from loss. The cost of bank-added insurance is significantly more expensive than the amount you would normally pay. Your leasing contract should further explain the costs and details for added insurance, or you can call your lender to find out more.
Warning
Again, your lender is listed as the loss payee, not you. When you lease a car, it belongs to the bank; you pay the bank for the time you intend to drive it. With that said, if you do incur a total loss and the insurance company pays it off, you will not receive any money for the vehicle, as it goes directly to the bank. You should consider this before you decide to put money down toward your lease. Putting out money toward your lease may offer you a cheaper monthly payment, but you won't see any of it back should you total your vehicle. This can prove a loss for people who pay thousands down or the entire lease cost upfront.
0 comments:
Post a Comment