Leasing a car: how does insurance work?
If you are a bit commitment-phobic, you could easily see the appeal of leasing a car instead of buying it. It’s like the car equivalent of renting a home rather than buying one, as you would agree to a long-term deal entailing you funding the vehicle through monthly financial outlay.
However, on UK roads, it is illegal for you to drive without insurance – and that requirement remains in place when you lease a vehicle. However, peculiarities of car borrowing can muddy the waters concerning which insurance package you should choose.
A tale of three insurance categories
If you are experienced in wading through the UK’s insurance market, you are likely aware that the country’s auto insurance is available in three main flavours: third party; third party, fire and theft; and fully comprehensive. The last of those covers all of the bases, so do you really need it?
Surprisingly or not, the answer is yes! The Telegraph cautions that car insurance isn’t bundled with a vehicle lease – and that only the highest level of protection will suffice for a leased car. In other words, you need to go for fully comprehensive cover, but you can still choose from where to get it.
So, where should you get “fully comp” insurance?
If you are concerned that opting for this level of cover would entail hefty monetary expenditure on your part, allow us to put this fear to rest. It can be a common misconception that “fully comp” is car insurance at its cheapest; however, many risky drivers actually go for the “bare bones” option.
As a result, the minimum legally permissible type of cover – third party – has been bumped up in price as more insurers have noticed risky drivers choosing it on account of its perceived lack of expense. All of this can leave “fully comp” cheaper than a third party policy.
“Fully comp” policies can still vary in price
It pays to be careful where you choose to source your cover. However, as approaching different insurance providers one after another can be an arduous and time-consuming process, you could save yourself a lot of hassle by instead asking an insurance broker to compare car insurance quotes.
After they have done so, they could present you with the quote which they deem the best from the selection they have uncovered. Call Wiser is an example of an independent broker capable of this.
Choose standard insurance for an unorthodox leasing option
If you borrow a car through personal contract hire (PCH), the lease agreement will be valid for 2 to 5 years, as the Money Advice Service highlights. Therefore, contrary to what you might have initially expected, what is called short-term or temporary insurance wouldn’t suffice.
That type of insurance would only stay in place for a term of up to 28 days – and repeatedly renewing the policy wouldn’t legally be an option. Besides, it’s standard for an auto insurance policy to last a year before being up for renewal, so go down the traditional route in this instance.
There’s another, less traditional insurance product which you might find yourself considering – and that’s GAP insurance. The “GAP” here means Guaranteed Asset Protection, says the Money Advice Service – but the word spelt out by the acronym seems apt because, if your leased car is stolen or written off, this insurance can help you close the gap in your ability to fund a car replacement.
Even if you don’t opt for GAP insurance, your standard cover could still help you pay for a vehicle replacement that would make the contract hire company happy.