What is Lease Car Insurance?
Lease car insurance is a type of motor insurance policy designed specifically for leased vehicles. It covers accidental damage, theft, fire, natural disasters, and third-party liabilities.
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How Does Car Leasing Work in India?
Leasing a car is a convenient, cost-effective, and ideal option for individuals who prefer to rent a car for trips or do not need a personal one. However, whether you own your own car or lease one, you must protect it from common risks and damages, and get insurance for leased cars, self-driven, or even rental cars. Let us understand how car leasing works in India:
- A leased car works on a contract basis, and you can get the vehicle for 2 to 5 years.
- There is no need to pay a down payment to lease a car in India.
- Generally, the cost of maintenance is included in the lease installments, however, you must go through the detailed terms and conditions of the contract.
- You can also purchase the vehicle at the end of the lease period in many cases.
- The leased car will mostly come with third-party insurance, however, you can extend the coverage by purchasing a comprehensive car insurance policy.
Why Do You Need Insurance for a Leased Car?
Apart from being a legal requirement, here are some reasons you need insurance for leased cars:
- Legal Obligation: As per the Motor Vehicles Act, 1988, it is mandatory for all cars (including leased cars) to have at least a third-party insurance, and failing to do so is a traffic violation.
- Protection Against Different Damages: Car insurance for leased cars covers repair costs in case of damages due to accidents, natural disasters, or more. This helps to reduce any unforeseen expenses and acts as a financial protection.
- Covers Third-party Liabilities: The right insurance for leased cars keeps you protected from legal and financial liabilities arising from third-party injuries, death, or property damage.
- Financial Safety: Leased car insurance also provides financial coverage if the insured vehicle is stolen or declared a total loss, as the repair cost exceeds 75% of its current Insured Declared Value (IDV).
What is the Difference Between Standard and Lease Car Insurance?
The table below highlights the difference between a standard car insurance policy and insurance for a leased vehicle:
| Parameter |
Standard Car Insurance |
Lease Car Insurance |
| Requirement |
Designed for private vehicles |
Specifically for leased cars |
| Suitable Coverage |
Can be third-party or comprehensive |
Comprehensive car insurance is usually preferred |
| Add-Ons |
Optional |
Often mandatory and required (examples: zero dep, return to invoice (RTI), engine protect, roadside assistance (RSA), etc.) |
| Premium Cost |
Lower premiums, generally based on the coverage |
Higher premiums due to enhanced coverage and mandatory add-ons. |
| Ownership |
Issued in the name of the owner-driver |
Issued in the name of the lessee with the leasing company as the registered owner |
What Does Lease Car Insurance Cover?
A lease car insurance policy provides coverage for the following damages and losses in India:
- Accidental damage to the leased car
- Theft or total loss of the vehicle
- Damages caused due to natural calamities (floods, storms, earthquakes)
- Losses incurred due to man-made disasters (riots, vandalism, strikes)
- Fire or explosion-related damages
- Third-party liabilities for injuries, death, or property damage
What Does Lease Car Insurance Not Cover?
Some of the common exclusions for which a lease car insurance cannot file a caim are given below:
- Wear and tear, ageing, or mechanical breakdowns
- Driving without a valid licence or under the influence of alcohol
- Electrical or mechanical failures not caused by an accident
- Damage due to illegal racing, speed testing, or reckless use
- Consequential losses
- Own damage if only a third-party policy is purchased
- Damage to accessories not declared in the policy
How to Choose the Right Insurance for a Leased Car?
Here are some tips that will help you choose the right insurance for a leased car:
- Review Your Lease Agreement Carefully: You should go through your lease contract in detail before finalising your lease car insurance. By understanding the minimum coverage requirements, required add-ons, and deductibles, you can pick a policy that aligns perfectly with the agreement, your budget, and needs.
- Compare Coverage Limits and Deductibles: Every insurance company offers different coverage options. It is always better to compare the coverage limits, inclusions, and deductibles offered by different car insurance companies. This ensures that the plan you select meets your budget and requirements.
- Check Reviews and Claim Experience: Always review customer feedback to gain a realistic understanding of how the insurer handles claims, particularly for leased vehicles. Look for reviews highlighting claim settlement ratio, service quality, network garages, turnaround time, etc. This helps you choose a reliable insurance for a leased vehicle and an insurer who offers a smooth experience throughout your car lease insurance tenure.
Over to You,
It is very important to buy the right insurance for a leased car and protect it from various types of risks. Choosing a car insurance policy that offers coverage from third-party liabilities as well as own damages is a safer option. It minimises the out-of-pocket expenses and offers the necessary peace of mind while on the road. You can easily compare and buy insurance for your leased car online, and compare different quotes to choose the most suitable policy.
