Are you thinking about getting a new car? If so, car leasing might be worth considering instead of buying. Car leasing is great if you love driving the latest models or if you’re not ready to commit to a car for the long term. Plus, it can be a good option if paying for a car upfront isn’t in the cards. But what about car insurance? Will your current policy cover a leased car, or do you need something different? Let's find out.
Will car insurance cover a leased vehicle?
Yes. In fact, when you lease a car in Canada since insurance isn’t included, you must get your own car insurance policy. Car insurance is mandatory in Canada, and you must have at least a basic liability insurance policy.
On top of that, most leasing companies expect you to have certain types of coverage, including basic liability, before they finalize the lease agreement, like comprehensive and collision coverage. And if you're financing your lease, your lender may have their own requirements for types of car insurance as well. In Canada, you are generally required to have the following types of coverage when leasing a vehicle:
Third-party liability coverage
Liability insurance is essential—it covers you in case of accidental injuries or property damage. It can help with medical bills, lost wages, and even legal defence and court costs if needed. Just like making your lease payments, having liability insurance is mandatory for the entire length of your lease.
Accident benefits coverage
Accident benefits coverage is also mandatory throughout Canada. It’s there to help you and others involved in an accident by covering things like injury treatment, medical bills, funeral costs, and caregiving if needed.
Uninsured automobile coverage
Depending on your province, uninsured automobile coverage might be required for a leased car. This coverage is important because it protects you if you’re involved in a hit-and-run or if someone without insurance (or with too little) hits you. It covers medical expenses, property damage, and other costs.
Direct compensation-property damage coverage (DCPD)
If you live in a no-fault insurance province, you might need DCPD coverage. This means your insurance company will cover repair costs or the value of your car if it needs to be replaced—only if you weren’t at fault in the accident.
Collision coverage
When leasing a car, optional collision coverage is often required—and it might even be part of the lease agreement. This coverage kicks in if you’re in an accident that requires major repairs or if the car needs to be replaced. You’ll still have to cover the deductible, but the policy ensures you won’t be stuck paying all the costs out of pocket while you're leasing.
Comprehensive coverage
Since you don’t actually own a leased car, comprehensive coverage is usually required as part of the lease agreement. This coverage protects you from costs related to things like theft, fires, vandalism, severe weather, and falling objects. While it’s not illegal to go without it, most leasing companies make it a mandatory part of the deal.
GAP insurance coverage
When you lease or finance a car, it's pretty common to get GAP insurance, which stands for guaranteed asset protection or guaranteed auto protection. This type of coverage provides extra financial protection if your car is totalled or lost. Essentially, it covers the “gap” between what you owe on your loan and the car's current value. Some lenders may require you to carry it to protect their loan.
Who pays for insurance on a leased vehicle?
As we mentioned earlier, a leased vehicle needs to be insured, and you'll be the one paying for it.
However, while your insurance company can provide coverage, you'll need to coordinate with the leasing company when choosing the policy. They may require you to get some insurance options that are usually optional. This is because the leasing company or lienholder technically owns the car and needs to protect their investment. It's something to keep in mind when you're leasing a vehicle.
Does leasing a car affect your car insurance premiums?
It can, since having a car lease can affect what types of auto insurance coverage you need to carry. If you own your car, you get to choose your level of coverage. But if you’re leasing, you have to meet certain requirements. For instance, leasing companies usually require you to carry comprehensive and collision coverage, whereas you can choose to skip those if you own the vehicle. They may also require you to carry GAP insurance, and any additional coverage will always lead to higher premiums and monthly payments.
Further, while liability coverage is mandatory whether you lease or own a vehicle, your leasing financing company may require you to carry a substantially higher coverage limit for liability. For example, the minimum required liability coverage amount in Ontario is $200,000, but with a leased vehicle, you may be required to carry $1 or $2 million.
However, once you finish paying off your lease, if you decide to keep the vehicle, you can drop your GAP insurance and choose whether you want to keep your collision and comprehensive coverage or lower your liability coverage limit.
How much does insurance cost on leased vehicles?
The cost of car insurance for a leased vehicle varies based on several factors, just like when determining car insurance premiums on an owned vehicle. While the list of factors is quite extensive, here are some of the most common ones that insurance companies consider when insuring leased cars:
- Your driving record and experience
- Your age and gender
- Where you live
- Vehicle year, make, and model
- How you use your vehicle
- Your coverage options
- Your deductibles
- Your claims history
Contact BrokerLink for more information on car insurance
Leasing a car can be a great option for many Canadian drivers. If you still have questions about getting insurance for your leased vehicle, reach out to BrokerLink. Our team of car insurance experts can help you decide whether leasing or buying is the best fit for you, and we’ll also help you find the right insurance policy for your car—whether you lease or own it.
Whatever your auto insurance needs, BrokerLink is here to help. You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.
Get an auto insurance quote [phone]
FAQs for leased car insurance
Does a leased car need different insurance?
It doesn't need different insurance—it just might need more insurance coverage. Your leasing company may require you to carry additional coverage options, like comprehensive and collision coverage, as part of your lease agreement.
What happens if you get in an accident with a leased car in Canada?
If you’re in an accident that totals your leased car, you’ll need to inform both the leasing company and your insurance provider. You’ll still be accountable for paying off the remaining lease balance, which is why having GAP insurance for a leased car can be essential.
What is "Full" car insurance coverage?
Each province in Canada requires all drivers to have car insurance. However, the amount of insurance mandated by the law is quite minimal, and there are many other types of coverage you can add to your policy. “Full” coverage insurance includes add-ons, such as collision and comprehensive coverage. Collision will cover you if your car is damaged in an accident, regardless of how the accident happened. Comprehensive provides you with protection against non-collision events, such as theft, damages due to weather or vandalism.
For more information on full coverage insurance, please speak to a BrokerLink broker!
If you have any questions, contact one of our local branches.
