Claims involved in an automobile accident while driving a leased vehicle are slightly different than if you own the vehicle. In other words, it can be somewhat more complicated when settling an auto insurance claim. The main reason for this is, although a lease agreement entitles you to physically possess and drive the vehicle for the term of the lease, the vehicle still belongs to the company that leased it to you. And, even if the lease agreement gives you a purchase option at the end of the lease – the vehicle remains under the car lease company’s ownership for the duration of the lease.
Important Steps After a Leased Car Accident
After the accident, your cortisol and adrenaline are running high. Take a deep breath and make sure you act methodically so that you aren’t chasing important details later. While you’re still at the site, be sure to get the name and contact information of the other driver involved as well as any witnesses. If you have a camera or smartphone camera, take pictures of the damage to both vehicles as well as any debris at the scene.
Once you’re finished exchanging information, taking pictures, and ensuring that there are no life-threatening injuries, you should then file a police report. This ensures that the incident is recorded with law enforcement should there be any issues with the other driver, insurance, or leasing company.
What Happens if I Have an Accident in a Leased Vehicle?
In the event your leased vehicle is involved in a car crash, the terms of your lease agreement will decide what your next move will be in regards to your obligations to the leasing company. You may be required to document the damage to the vehicle as well as have the vehicle inspected by a designated automotive service center, chosen by the leasing company to fully assess the damage. In turn, the service center will also provide an outlined estimate of the cost to repair the vehicle, which will then be used for the filing of an insurance claim.
This inspection will determine if the car is repairable or needs a full replacement. If your vehicle is totaled, your insurance policy should cover the value up until the coverage limit. Once that is reached, your GAP insurance should meet the difference. These coverages can help roll the balance into a new lease or you will be stuck paying off the vehicle’s value into the next lease.
How Am I Compensated for Repairs After a Leased Car Accident?
After the leaseholder receives the estimate on damage and repairs, it largely depends on the kind of auto insurance coverage you have as to what happens next. Generally, you or the body shop will receive a payment to repair the vehicle. This amount will be determined by subtracting your deductible. More specifically, should the vehicle have incurred $3,000 worth of damage and your deductible is $300, you’ll be given the remaining balance of $2,700 to repair the vehicle…or the body shop will, whatever the case may be. However, if another insured driver is found to be at-fault, their insurance carrier will most likely cover the $3,000 in repair work.
What Type of Insurance do I Need for a Leased Vehicle?
While state law requires that all drivers carry at least the minimum auto insurance coverage, in the case of most leased vehicles, the driver will have little choice in the matter. The leasing company will require you to carry substantially more than the set minimums, which are simple liability and property damage, and mandate you to include collision and comprehensive coverage. Maintaining more extensive coverage on your leased vehicle is a good idea in case you have an accident, or the vehicle is stolen or suffers severe damage in a fire; the vehicle can be repaired or replaced with no major out-of-pocket expenses for you.
Who Pays for Repairs on a Leased Vehicle?
An important fact to keep in mind is – when you lease a vehicle – although you may not technically own the vehicle, you are still responsible for any sustained damages including scratches, wear and tear, and accidents. At the end of your lease, your vehicle will go through an inspection to determine whether your vehicle is still in like-new condition. If you were in an accident and the lease company deems the repairs inadequate, you can get charged for the damages a second time.
Lease agreements will generally outline who must pay for maintenance and repairs throughout the term of the contract. In the case of a motor vehicle accident, some leasing companies will ask you to use a particular repair shop. This ensures that the repairs are up to their standards and if they aren’t, you won’t be liable to have the repairs done a second time.
What is Gap Insurance and Does it Cover Totaled Vehicles?
In a serious accident where your leased vehicle is judged unrepairable and is considered a “total loss”, insurance companies are often likely to be stuck for the vehicle’s actual cash value, rather than for the cost of repairing the vehicle. Unfortunately, the vehicle’s actual cash value typically won’t be enough to cover whatever is still owed under the vehicle lease.
The “gap” that exists between what the insurance company will pay for the vehicle and what is owed could be a significant amount, which is why gap insurance is a viable option. A gap insurance policy, making up the difference between what is still owed on the lease and the actual cash value of the vehicle, can be purchased through your insurance company. It’s also possible that your leasing company will insist that you add gap insurance to your monthly payments as part of your lease contract.
In the end, should you decide to lease a vehicle, keep it simple – and, be sure to read the agreement in full to be well aware of all your lease obligations before you sign on the dotted line.
Make sure you and your car are protected in the event of an auto accident by choosing a quality, affordable auto insurance plan from Freeway Insurance. Request a free auto insurance quote online, over the phone at (800) 777-5620 or by visiting one of our conveniently-located offices.
