Car Insurance Requirements for Leased Vehicles

Leasing a car is a great way to drive a newer model without the long-term commitment of ownership, but it also comes with a few additional responsibilities, like making sure you have the right car insurance coverage.  Unlike financing or buying a car outright, leased vehicles often come with specific insurance requirements set by the leasing company to protect their investment.

In this blog, we’ll break down the coverage you need, how to get it, and answer some commonly asked questions so you can stay protected throughout your lease. 

Key takeaways

Leasing a car comes with additional insurance requirements. Here’s how to buy insurance for a leased car:

1. Find your list of requirements 
2. Customize your quote 
3. Compare quotes 
4. Get help from a broker
5. Send proof of insurance

Insurance for a leased car vs. a bought car

The biggest difference between purchasing insurance for a leased car vs. a car you own comes down to who actually owns the vehicle. 

When you lease a car, the leasing company owns it, not you. Because of this, your lease agreement will likely include specific insurance requirements you must follow for the duration of the lease. 

When you buy a car, whether you finance it or pay cash, you’re the legal owner and have more flexibility. While you need to meet your province’s minimum insurance requirements, the coverage, limits, and deductibles are entirely up to you.   

Car insurance requirements for leased vehicles

When you lease a vehicle, you are contractually obligated, as stated in your lease agreement, to maintain car insurance for the duration of your lease. In that document, you will typically find a list of insurance requirements for leased vehicles, which will look something like this:

• Minimum $1 million in third-party liability coverage
• Collision coverage with a maximum deductible of $1,000 
• Comprehensive coverage (including fire and car theft) with a maximum deductible of $1,000 
• The lessee must be listed as the primary driver and have a valid driver’s license 
• The finance or leasing company must be listed as Loss Payee and/or Additional Named Insured

A basic policy that meets only the provincial minimum coverage is usually not enough to satisfy these requirements. Leasing companies generally require more coverage, given the financial risk a leased vehicle represents to the finance company.

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Requirements may differ by manufacturer

While insurance requirements are fairly consistent across most car manufacturers in Canada, some companies have minor variations or additional endorsements. 

For example, leased Teslas in Canada require cover for at least $50,000 in property damage, $300,000 for bodily injuries to any one person, $500,000 for any one accident, and physical damage insurance for the full value of the vehicle. 

So, be sure to confirm the specific insurance requirements for your vehicle in your lease agreement or on your finance company’s website.

• Ford
• Honda 
• Toyota 
• Hyundai 
• Kia
• Mazda 
• Tesla
• Subaru
• Lexus 
• Lincoln

How to buy insurance for a leased car

Buying insurance for a leased car isn’t all that different from buying it for a vehicle you own. You just need to be a bit more careful when it comes to the types of coverage, coverage limits, and deductible amounts. Since your lease agreement sets specific requirements, you’ll need to ensure your policy checks every box before you start driving. Here’s how to do so: 

1. Find your list of requirements: Review your lease agreement or your finance company’s website. You’ll usually find a list of required coverages, limits, and maximum deductibles. 
2. Customize your quote: Ensure the quotes you get include all coverages, coverage limits, and deductibles outlined in the lease requirements. 
3. Compare quotes: Tools like YouSet make this part easy by showing you multiple quotes from different insurers side by side. This helps you find the best price without compromising the coverage your lease requires. 
4. Get help from a broker: If you’re unsure about lease-specific terms or coverage types, a licensed insurance broker can help clarify the requirements and ensure the policy you select meets all your lease obligations. 
5. Send proof of insurance: Once your policy is active, email or submit a copy of your insurance card or pink slip to your finance company or leasing office so you can drive your new car home. 

FAQs about insurance for leased vehicles

Leasing a car can make driving a new vehicle more affordable, but it comes with additional insurance requirements. Here are answers to some of the most commonly asked questions about insuring a leased vehicle:   

Do you need your own insurance for a leased car?

Yes, you need your own insurance for a leased car. Don’t confuse car insurance with protection plans, extended warranties, or mechanical breakdown coverage offered by car manufacturers, as these are not the same as car insurance. Car manufacturers and their financing companies do not provide insurance for leased vehicles. 

If you mistakenly think any of these count as car insurance and you don’t buy a valid policy, you’d be violating your lease agreement and driving uninsured. This is illegal and can lead to hefty fines, license suspension, and serious legal and financial consequences if you get into an accident.

Who pays for insurance on a leased vehicle?

You, the lessee, pay for insurance when you lease a vehicle. Since you’re the primary driver and are responsible for the vehicle under your lease term, you’re also responsible for maintaining the required insurance coverage and paying the monthly premium. 

Even though your leasing or finance company is the owner of the vehicle and is listed on your policy as Loss Payee and/or Additional Named Insured, they do not pay the premium.

Does insurance cost more for a leased vehicle?

Insurance doesn’t always cost more for a leased vehicle, but it can. Leased cars often come with strict insurance requirements, which can mean you have to get more coverage than you would if you owned the vehicle outright. 

On top of that, the cost of car insurance in Canada depends on many factors, including your driving history, your vehicle’s value, and your claims record. So while leasing a car doesn’t automatically make your insurance more expensive, the additional coverage required by the lease agreement can increase your premium.