Car Insurance for Business Leases

Business contract hire car insurance can be more expensive since higher coverage is required. Generally, a leasing company will require at least full car insurance coverage.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • All leased vehicles must be insured comprehensively
  • Business contract hire car insurance is not covered in the leasing price
  • There are various types of insurance policies for leased vehicles
  • Insurance for leased car vs. bought car varies in the required coverage

Leasing is the easiest way for businesses to drive a new vehicle with a reduced upfront cost. Whether leased or owned, it is mandatory for every driver to have car insurance to be able to drive on U.S. roads.

However,  if you have a car lease, insurance average rates are generally higher since insurance requirements to lease a car are higher.

Business lease car insurance is available, but you need to compare quotes to make sure you are getting the best deal just like on your personal insurance. 

For car lease and insurance deals, enter your zip and compare insurance quotes today to make sure you’re not overpaying for coverage.

Business Car Contract Hire Explained

Why lease a vehicle when you own a business? Business contract hire car leasing can save businesses money as leasing a car is generally cheaper than buying. You can also save money on business taxes, such as deducting the cost of your lease.

Getting the best business contract hire car deals can save your business upfront operating costs.

How does business contract car hire work?

Businesses can choose to work with a company on how to lease a vehicle for business use. Leasing companies will explain how to buy car insurance for leased vehicles and may be able to provide an insurance quote for business car leases.

Many factors will determine is it better to lease or purchase a business vehicle for each company. How many vehicles you will need, the type of vehicle needed, and how long you want to keep the vehicle are important factors to determine when is it a good idea to lease a business vehicle.

Does contract hire include car insurance?

Unfortunately, the leasing price does not include insurance, whether it’s a new or used car business contract hire. Car insurance for business leases is generally higher coverage at a higher rate. Finding business car lease deals including insurance is rare.

Leasing is the most convenient way of getting more cars for less money, but it doesn’t mean you can skip insurance. In fact, a leased car may require more coverage than an owned car.

So, do you need full car insurance coverage for a lease? The answer is probably yes. The rate that you pay for car insurance is affected by the coverage type you choose. Let’s take a look at the average annual rates for different coverage types.

Average Annual Car Insurance Rate Based on Type of Coverage
CompaniesAverage Annual Car Insurance Rate for Low CoverageAverage Annual Car Insurance Rate for Medium CoverageAverage Annual Car Insurance Rate for High Coverage
USAA$2,404.11$2,539.87$2,667.92
Geico$3,001.91$3,213.97$3,429.14
State Farm$3,055.40$3,269.80$3,454.80
American Family$3,368.49$3,544.37$3,416.40
Nationwide$3,394.83$3,449.80$3,505.37
Progressive$3,737.13$4,018.46$4,350.96
Farmers$3,922.47$4,166.22$4,494.13
Travelers$4,223.63$4,462.02$4,619.07
Allstate$4,628.03$4,896.81$5,139.02
Liberty Mutual$5,805.75$6,058.57$6,356.04
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You can see that high coverage is the most expensive, but it offers liability, collision, and comprehensive coverages. This type of insurance will be needed for leasing a vehicle. Since the car belongs to the dealer, they want to protect their investment in case your car is stolen, or you get into an accident.

This video details what full coverage car insurance is and what it will cover.

Conventional insurance companies often struggle to offer appropriate policies for lease car coverage, especially if the owner and the person keeping the vehicle do not agree.

This usually happens if the two enter a personal contract hire (PCH) or personal contract purchase (PCP).

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Car Insurance Coverage is Compulsory

Before you drive off your next leased car, make sure it is insured. In case you don’t have car rental coverage to transfer to your new vehicle, you will have to purchase it before leaving the leasing office or dealership. Driving a leased car without insurance is not an option.

In most states, some minimum level of liability coverage is required, but your leasing company might need more than the state minimum requirements.

Your leasing company will tell you what coverages you need to carry.

What kind of car insurance do you need for a leased car?

Lease car insurance requirements are often higher since leasing companies require your leased car to have high liability insurance limits. There are those who will even require you to carry a lower deductible or make you put in some backup money for the period of the lease in case your deductible is higher.

Each leasing company will have its own requirements. For example, Honda lease insurance requirements will differ from Volkswagen’s lease insurance requirements.

Some rental companies specify in their lease agreement that if repairs are to be made due to a collision or comprehensive claim, you must use Original Equipment Manufacturer [OEM] parts only, which are generally more expensive compared to after-market parts.

Fortunately, most auto lease insurance policies have a low-cost option that caters to the difference between the price of original parts and generic ones.

What type of car insurance is required for a leased car by law?

These are some of the coverages that are generally mandated by law:

  • Liability coverage – This is the primary insurance for leased cars required by most states. Liability insurance may help cater for injuries to others or destruction to property [such as their fence or car] that you cause.
  • Uninsured and underinsured motorist insurance coverage– Depending on your state, this coverage might be mandated by law on your auto insurance policy.

Insuring a leased car is just like insuring a car you purchased when it comes to coverage and how your rates are calculated. According to the Insurance Information Institute (III), every person will have a different cost for insurance due to variables including age and driving record.

It might surprise you to find out that your age, gender, and marital status can affect your car insurance rates. Let’s look at how much of a difference those factors make.

Average Annual Car Insurance Rates by Age, Gender, and Marital Status
CompaniesAverage Annual Rates for a
Single 17-Year-Old Female
Average Annual Rates for a
Single 17-Year-Old Male
Average Annual Rates for a
Single 25-Year-Old Female
Average Annual Rates for a
Single 25-Year-Old Male
Average Annual Rates for a
Married 35-Year-Old Female
Average Annual Rates for a
Married 35-Year-Old Male
Average Annual Rates for a
Married 60-Year-Old Female
Average Annual Rates for a
Married 60-Year-Old Male
USAA$4,807.54$5,385.61$1,988.52$2,126.14$1,551.43$1,540.32$1,449.85$1,448.98
GEICO$5,653.55$6,278.96$2,378.89$2,262.87$2,302.89$2,312.38$2,240.60$2,283.45
Nationwide$5,756.37$7,175.31$2,686.48$2,889.04$2,360.49$2,387.43$2,130.26$2,214.62
State Farm$5,953.88$7,324.34$2,335.96$2,554.56$2,081.72$2,081.72$1,873.89$1,873.89
American Family$5,996.50$8,130.50$2,288.65$2,694.72$2,202.70$2,224.31$1,992.92$2,014.38
Farmers$8,521.97$9,144.04$2,946.80$3,041.44$2,556.98$2,557.75$2,336.80$2,448.39
Progressive$8,689.95$9,625.49$2,697.73$2,758.66$2,296.90$2,175.27$1,991.49$2,048.63
Allstate$9,282.19$10,642.53$3,424.87$3,570.93$3,156.09$3,123.01$2,913.37$2,990.64
Travelers$9,307.32$12,850.91$2,325.25$2,491.21$2,178.66$2,199.51$2,051.98$2,074.41
Liberty Mutual$11,621.01$13,718.69$3,959.67$4,503.13$3,802.77$3,856.84$3,445.00$3,680.53
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You can see that older, married females pay the least while young, single males pay the most.

It makes sense that your driving record affects your car insurance rates, but do you know just how much one incident will increase your rates? Let’s look at the average rates for a clean driving record versus one with traffic tickets.

Average Annual Car Insurance Rates by Driving History
CompaniesAverage Rates With a Clean RecordAverage Rates With 1 AccidentAverage Rates With 1 DUIAverage Rates With 1 Speeding Violation
USAA$1,933.68$2,516.24$3,506.03$2,193.25
GEICO$2,145.96$3,192.77$4,875.87$2,645.43
American Family$2,693.61$3,722.75$4,330.24$3,025.74
Nationwide$2,746.18$3,396.95$4,543.20$3,113.68
State Farm$2,821.18$3,396.01$3,636.80$3,186.01
Progressive$3,393.09$4,777.04$3,969.65$4,002.28
Travelers$3,447.69$4,289.74$5,741.40$4,260.80
Farmers$3,460.60$4,518.73$4,718.75$4,079.01
Allstate$3,819.90$4,987.68$6,260.73$4,483.51
Liberty Mutual$4,774.30$6,204.78$7,613.48$5,701.26
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You can see that just one infraction can raise your rates significantly. Obeying traffic laws in a simple way to keep your insurance rates low, whether you are leasing or buying a car.

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Car Insurance Coverage Required by the Leaseholder

Your leased car belongs to the company that finances it. To protect its economic stake in the vehicle, the finance company will most likely require you to have comprehensive and collision coverage on your car policy. This usually results in higher insurance rates for leased cars.

Do I need collision insurance on a leased car?

Leasing companies will generally require collision and comprehensive coverages on a leased car. These coverages are:

  • Collision coverage – Regardless of whether you are at fault or not, collision coverage will help pay for your car repairs in case you get hit by another vehicle, your car hits someone else’s car, or it rolls over.
  • Comprehensive coverage – This helps pay for damages to your car caused by something other than an accident, like vandalism, theft, or a falling object.

You can see why these additional coverages would be useful in the event of an accident.

What is business lease Gap insurance?

In addition to your primary auto insurance for rented cars, gap insurance will give you extra protection in case your vehicle is totaled in an accident or stolen.

This optional coverage is meant to fill the gap between what your insurer would pay for a typical comprehensive or collision claim and the lease amount still outstanding on the vehicle.

Watch this video to find out more information about Gap coverage.

Most leasing agencies automatically include this coverage in the lease payments. Make sure you ask your leasing office if they include lease gap or loan coverage as part of the contract. If not, you can buy this coverage from your insurance provider as part of your auto insurance policy.

Saving on Car Insurance

Whether it’s for an owned or leased car, auto insurance premiums can be pricey and almost everyone dreads paying them. However, with a little understanding, you can make a considerable amount of savings on your insurance premium payments.

Here are some helpful tips:

  • Insure multiple cars with the same insurance company, or bundle your vehicle and homeowner’s insurance to qualify for significant discounts on your automobile insurance.
  • Save more by keeping your driving record clean of any accidents.
  • Equip your new car with safety features such as a passenger restraint system or anti-theft device. This could help you save more depending on your insurer and where you live.

Car insurance can be expensive so be sure to ask for all discounts you are eligible for.

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Leasing is a known strategy for people who plan to upgrade their vehicle every couple of years and would want to buy a vehicle that does not maintain its value.

As the monthly repayments for the leased car do not include the standard insurance coverage, it is the duty of the person or business leasing the car to arrange for insurance- same as if you were buying a car on finance.

The right insurance policy will save you a lot of cash and headache at the end of the lease agreement. Get the cheapest business contract car hire insurance by comparing quotes today. Enter your zip code below to get quotes now.

Frequently Asked Questions

Below are some common questions about business contract hire car insurance and leasing.

Does business use affect car insurance?

Yes, a car lease through business insurance is separate from personal usage. If you are using your car for business, personal car insurance may not cover any damage you incur. For example, if you don’t tell your insurance company you are driving for a delivery or rideshare and get in an accident, they can deny the claim.

However, a business leased car used for personal use is between the employee and the company.

How much is car insurance on a leased car?

That will depend on the coverage you are required to carry by the leasing company. Other factors, such as driving history, will also factor into the rates.

Is car insurance cheaper if I lease?

Car insurance on a lease is generally higher, but only because the amount of coverage required is usually higher than people normally carry. The leasing company can also require extra coverages, such as Gap or uninsured motorist coverage.

Is business contract car hire in the UK different?

Insurance requirements, prices, and laws will be different in other countries. You would need to speak to an agent from the UK to find out all of the ins and outs.

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Average Monthly Car Insurance Rates by State