When obtaining a new car, you’re basically faced with two main choices – buying or leasing. Both have their pluses and minuses, such as lower monthly payments when leasing as opposed to financing and a buildup of equity when buying rather than leasing. When it comes to getting car insurance for your new vehicle, however, there are no major differences since the cost of insuring a car is based primarily on the make and model of the new vehicle and your personal driving history and not whether the car is being purchased or leased.
A minimum amount of liability car coverage is required of drivers in just about every state, including here North Carolina. State law also requires that drivers carry uninsured/underinsured motorist coverage.
Although not recommended, car owners so desiring can legally drive their vehicles while carrying just this minimal amount of car insurance. When you’re leasing or financing a car, though, the financing or leasing lien holder will almost certainly require that you add a number of additional types of insurance coverage to your policy, namely:
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- Collision protection – pays for damage or destruction of the vehicle in the event that it’s involved in a collision with another vehicle or other object.
- Comprehensive protection – pays for damage, destruction or loss of the vehicle from events other than collisions. This may include theft, vandalism, fire, flood, damage from falling objects, etc.
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Collision and comprehensive insurance are required by lenders because the payments made on claims for these portions of an insurance policy will help protect their financial interests in the vehicle for which they have a lien.
Other Required Insurance
Another type of insurance usually required by car leasing companies is something called Gap insurance. Gap, which stands for Guaranteed Asset Protection, may even be automatically added into your monthly lease payments. The purpose of this coverage is to make up the difference between the actual value of a vehicle that’s been totaled (or totally written off as a loss) and the amount still owed on the lease contract. Gap coverage is also available for new car buyers, and its value is most apparent during the early portion of a financing contract, when the amount still owed on the car exceeds its value.