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FAQ: Choosing Auto Insurance Coverage
Do I need special auto insurance coverage if my auto's leased or financed?
Most of us are unable to pay for a new car up front so leasing and financing have become
common practices. Hence, it's important to understand how they affect your insurance. The first thing
to do is check your loan or leasing agreement because it should provide details on the kinds of auto
insurance coverage your financial institution requires.
Though each leasing agent or lender has different requirements, most will require you to buy
comprehensive and collision coverage when you purchase your auto insurance policy. If the terms
‘comprehensive coverage' and ‘collision coverage' sound like a foreign language, check out the auto
insurance coverage definitions in our FAQs for help!
Many financial institutions will require liability limits that are higher than your state's
minimum coverage requirements. This is done to protect their interest in your loan. If you get into an
accident, the financial institution gets stuck with the unpaid portion of your loan. It's logical that
they would want to protect themselves.
When buying auto insurance coverage for your leased auto, remember that most insurance
companies pay only the actual cash value— the market value factoring in age, mileage, and wear and
tear— for a vehicle, rather than that vehicle's replacement cost. In other words, if you crash your
1974 VW Beetle, don't expect a brand new Beetle out of the deal! If you're involved in an auto accident
and your leased auto is severely damaged, you may find yourself responsible for damages that your auto
insurance policy doesn't cover.
Don't skimp on auto insurance coverage for your leased or financed vehicle. Make your auto
insurance coverage work for you by purchasing the highest coverage limits you can afford. Generally,
higher limits don't cost much more than lower ones, but you'll be glad you have the increased protection
if you're ever involved in an accident. Make sure you get several auto insurance quotes from Esurance to
help you make an informed decision about your auto insurance coverage. If you have more questions,
consult the Esurance Auto Insurance Coverage Counselor to help determine the right coverage for you.
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