What Insurance Do You Need For A Leased Car?

You’ve found your dream car, you’ve sorted your car finance and you’ve got a pick-up date.

Now it’s time to make probably one of the most important decisions you’ll make about your car – figuring out what type of car leasing insurance you need.

Here’s our guide to what insurance is, how it works, and the various types of policies that exist.

What is insurance?

So, what exactly is insurance?

In general, insurance is a type of contract between you and a company that guarantees that you’ll be paid a lump sum in the event of a particular type of loss or injury. You’ll pay a regular payment – known as a premium – in return for this guarantee.

Car insurance is basically a way to protect yourself and others against unforeseen costs in the case of accidents, collisions or injuries.

That’s because if an accident happens and you are to blame, your insurance will cover the cost of damage to the other person’s car, or the cost of their injuries. If, on the other hand, if your car is damaged by another person, the cost of repairs will be paid for by the other person’s insurance.

So, basically, you only have to claim on your insurance if you’re the one at fault in an accident. If you aren’t at fault, the other person will claim on their insurance.

Why you need car insurance

The most important reason you need car insurance is because it’s against the law to drive a car on UK roads without it. The Road Traffic Act 1988 (a truly thrilling read from start to end!) says that you need at least Third Party coverage.

Making sure that everyone has insurance on their vehicles is a no brainer as it significantly reduces the risk of people losing money through accidents that they weren’t responsible for. For example, if an uninsured driver crashes into you and can’t pay the costs of repair to your car, you’ll be left with the bill. That’s not exactly a situation that you want.

Mandatory car insurance – in theory – means that you’ll never be out of pocket because of an accident that wasn’t your fault. That’s because if an accident happens and you are to blame, your insurance will cover the cost of damage to the other person’s car, or the cost of their injuries. If, on the other hand, if your car is damaged by another person, the cost of repairs will be paid for by the other person’s insurance.

So, basically, you only have to claim on your insurance if you’re the one at fault in an accident. If you aren’t at fault, the other person will claim on their insurance.

Types of insurance

There are essentially three types of car insurance to choose from: third party; third party, fire and theft; and comprehensive. There are obviously other types too, which we’ll go into too, but these are the three are the most common ones. Here’s some more details about what you get with each type of coverage:

Third Party only

This is the bare-bones, absolute minimum when it comes to insurance policies. Third party covers only the cost of damage or injuries to another person or their car. It doesn’t cover the cost of your vehicle if it’s damaged in an accident, if it’s stolen or if it’s damaged by fire, so you’ll have to pay for these repairs yourself.

Third Party, Fire and Theft

In terms of coverage, this is the middle-ground one – it’s slightly more far-reaching than third party but it’s not the very best you can get, like comprehensive. The key benefit of third Party, fire and theft is that you’re covered for the cost of damage to your own vehicle, as well as damage to another vehicle.

As you can work out from its name, with third party, fire and theft, you’ll also be covered against damage or injury caused by fire or by theft.

Comprehensive

Comprehensive is the widest form of insurance available. It will cover you for third party damage, fire damage and theft, and usually other forms of damage too, like weather. It also covers the car against damage to it that is your fault too.

What falls under this type of coverage can vary between different insurance companies, so it pays to read the small print when you come to choosing a particular policy so that you don’t get caught out later on, if you come to claim.

As it covers the most eventualities, comprehensive insurance cover is usually the most expensive, but on rare occasions you can find that comprehensive cover could actually work out cheaper than other forms of coverage. That’s because a lot of people choose third party, fire and theft plans because they’re the middle option, so the insurance companies take advantage of their demand by upping the price.

Usually, car leasing brokers will insist you take out a comprehensive insurance policy. This is so they can recoup their investment if you write off the car.

Specialist types of car insurance

As well as the big three listed above, there are also other forms of car insurance too, as we mentioned earlier.  These are more specialist and won’t necessarily suit the majority of drivers. But you never know – they might suit you.  Here are three of the main types of specialist car insurance:

Classic Car

Vintage cars (we’re talking about the likes of the Jaguar E-Type, the Austin-Healey 3000 and Porsche 911 here) often need a special type of insurance, reflecting the fact that they’re more of an investment that the majority of modern-day vehicles. What’s considered a ‘classic car’ tends to vary between insurers, but HMRC states that classic cars are those which are over 15 years old and have a value of £15,000 or more.

Temporary

This type of insurance will cover you for a short-term period of time – from one day up to a month (28 days). You’ll usually pay to insure a car by the day.

It can be useful if you need short-term access to a car for a limited period of time – for instance, if you’re moving house, moving a car you don’t usually drive between locations or borrowing a friend’s car.

Multicar Insurance

Multicar insurance lets you insure a number of cars from the same household on the same policy. The main benefit of this policy is convenience and also the possibility of a better deal – some insurers will give you a discount to encourage you to add more cars to same policy.