So, you’ve found your perfect car, decided on a car finance option and you’re about to sign on the dotted line. That’s the car leasing process sorted, right?
You’ve got car insurance to think about too – unless you’re looking for a stay at Her Majesty’s Pleasure. Whilst insuring a lease car isn’t all that different from insuring any other car, there are a few things to think about. This section explores some of them.
What is insurance and how does it work?
Car insurance is basically a type of financial guarantee. You pay a set amount upfront or for a period of months, in return for a guarantee that the insurance company will pay out a certain amount if you damage another person’s car, or if your car is damaged by accident, fire or theft. The situations that the insurance will pay out for – and the amount itself – will vary from policy to policy and company to company.
So, if you have an accident, how does insurance actually work?
Well, the driver who claims on their insurance is dependent on who’s to blame. Generally, if you’re to blame, you’re responsible for repairing the damage, so unless you’ve got money coming out of your ears, you’ll probably want to claim the money through your insurance policy.
This is where being insured comes in handy.
If you’ve damaged someone else’s car and it’s your fault, you’ll claim the cost of repairing the damage you caused from your insurance company. On the other hand, if the other driver is at fault, they’ll be responsible for doing this.
For a full explanation of what insurance you need and why, check out out blog post here.
Types of insurance
In terms of leasing a car, the only type of insurance you need to be interested in is comprehensive cover. This is usually the type of coverage that insurers insist you get if you’re leasing a car. I think it’s useful to know about the other types of insurance that exist too though, so you know what actually goes into comprehensive cover and what you’re protected against.
- Third party: The most basic form of coverage. You are covered against the costs of repairing damage to another driver’s car. You aren’t covered for damage to your own car.
- Third party, fire and theft: You’re covered for the cost of damage to another driver’s vehicle, as well as damage caused by fire to your own car or the cost of replacing your car if it’s stolen.
- Comprehensive: The best coverage you can get and a combination of the first two – you’re covered against the cost of damage to another driver’s car and your own if you’re at fault in an accident, as well as damage caused by fire and the cost of replacing your car if it’s stolen. You might also be covered against damage caused by weather conditions and other freak events.
As you can see, comprehensive cover gives you the best protection, which is why a lot of lease agreements specify that you have to have this on the car.
What is GAP Insurance?
There also other types of insurance coverage that you can get out alongside the above policies. One of these that is specific to car leasing is a type of coverage called GAP.
GAP stands for Guaranteed Asset Protection and it’s a type of extra coverage that most leasing brokers will make you take out on a car that you’ve leased.
That's because new cars lose value quickly which can leave you out of pocket if you need to claim. GAP insurance is intended to protect you against this from happening by protecting value. It covers the difference in what the car was worth at the start of the lease and what it is worth at the time of the accident.
GAP insurance is a bit of a complicated subject, especially when you dig down into all the different types. For an in-depth look, check out our blog post here.
How much does insurance cost?
I’d like to tell you that there was one fixed, amazingly low cost for everyone getting insurance, but unfortunately, there isn’t.
There’s no set price for insurance and the cost will vary from driver to driver, depending on how much of a risk the insurance company thinks you are.
Insurance companies are notoriously ruthless when it comes to protecting their cash so it’s not in their interest to attract the business of drivers who are more likely to get involved in an accident and force them to open their wallets. Naturally, the insurance company will charge a higher price to drivers they think are more likely to get involved in an accident.
There are a few ways that careful drivers can reduce the cost of their insurance policies though. The trick is to prove that you’re a good driver who doesn’t cost the insurance company much.
The best way to do this is by protecting your no claims bonus – an honour that’s conferred on you if you manage to go a year without smashing a car up and claiming. The no claims bonus will roll over from year to year and it’ll give you a discount when you come to renew your policy making it a pretty valuable tool to reduce your overall premium. Kerching.
If you do have an accident, not claiming for the damage to the other driver’s car or your own can actually help to lower your premium when you come to renew.
What happens when you crash?
It’s the thing we all dread when we’re driving, but no matter how safe you are on the roads, you’re always at risk of an accident happening.
Here’s what happens when you crash and some more details about what you need to do.
- Stop the car
- Decide if you need to call the emergency services
- Exchange details with the other driver
- Contact your insurer
That sounds pretty simple but there's a bit more to it than that. For a full explanation of what to do when you crash, check out our blog post here.