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Insurance for A Leased Vehicle - Everything You Need to Know?

Team AckoDec 20, 2022

Owning a car is not for everyone. You not only have to pay for the vehicle itself, but there are also significant maintenance and service costs associated with it. Your other option is to rent a cab or auto whenever you need to get somewhere. Depending on how frequently you avail of these services, it can also get pretty expensive. And let's not forget the uncertainty of getting a cab and the wait times. If you are looking for a middle ground that doesn't conflict with the nuances of owning a car and depending on cabs, you may want to look into Car Leasing.

Car Leasing is a concept where you use a vehicle for a period of time in exchange for timely monthly payments. When the lease ends, the vehicle is returned back to the owner or the Lessor. You don't have to deal with maintenance or service costs, nor do you have to deal with depreciation losses. But what happens if you are involved in an accident in a leased vehicle? Read on to learn how Car Insurance for a Leased Vehicle works.

Insurance for A Leased Vehicle - Everything You Need to Know?

Contents

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How Does Car Leasing Work in India?

Before we get into the Insurance aspect of car leasing, let us first dive into how car leasing works in India. Here are a few important points you should be aware of: 

  • You can lease a vehicle for two to five-year contracts. 

  • You do not need to make a downpayment when you lease a car.

  • All vehicle maintenance costs are included in the lease installments. 

  • Some Lessors allow you to purchase a vehicle at the end of the lease period. 

  • When you lease a vehicle, it will most likely come with only third-party insurance. This means that in case you are involved in an accident, you are responsible for fixing damages to the leased vehicle. 

Insurance for Leased Cars

Insurance for leased cards is significantly different from insurance for privately owned vehicles. Although you do get third-party insurance from the Lessor when you lease the vehicle, it does not protect you if the leased car is stolen or damaged in a natural or man-made disaster. To protect yourself better, it's always advisable to get comprehensive insurance with certain add-ons to cover yourself financially from anything that may happen out of the blue. 

Here are some of the coverages offered in Leased car insurance:

Collision Damage Waiver (CDW)

A Collision Damage Waiver can come to your aid in cases of minor damages to the bodywork of your car. Small dents and scrapes are common under Indian driving conditions. The CDW can help you in this regard.

You must note, however, that the Collision Damage Waiver does not cover damage to the windshield, the interiors, or the major mechanical components such as the engine, gearbox and wheels.  You must also keep in mind that if any of the damages occurred due to reckless or rash driving, or if you were driving under the influence of alcohol, then you will not be eligible for any form of coverage. 

Theft Protection

This is pretty self-explanatory. The theft protection cover will ensure that you are not financially liable to the Lessor if the rental vehicle has been stolen. Another benefit of this cover is that damages incurred to the vehicle during the attempt to steal it are also taken care of under this cover. 

Third-Party Liability

Third-party insurance usually comes as a default with your leased vehicle and protects you from any financial liability that may arise in case there is damage to a third party when you are involved in an accident. This can include bodily harm and damage to the third party's vehicle or property.

Additional Add-Ons in Rental Car Insurance

Depending on your insurance provider, you may have the option to opt-in for the below add-ons, if you are eligible for them. 

Super Collision Damage Waiver (SCDW)

While Collision Damage Waiver (CDW) only covers damages to the bodywork, opting for the Super Collision Damage Waiver will increase the cover to other parts of the vehicle as well. This can be a major relief if your leased vehicle is involved in anything more serious than a fender bender. 

Uninsured Motorist Protection (UMP)

Uninsured Motorist Protection will cover any medical costs that may come up if the driver of the other vehicle that was involved in the collision is not insured. 

Supplemental Liability Insurance (SLI)

When it comes to third-party liability insurance, there is usually an upper limit set by the Lessor or company from which you lease your vehicle. Supplemental Liability Insurance increases that limit significantly to make sure that you are protected even if the third party suffers serious damages or injuries. 

Roadside Assistance Cover (RSA)

Roadside assistance, as the name suggests, comes in handy if your vehicle breaks down and you are left stranded on the side of the road. If the damage is minor, a mechanic is sent on-site to fix your car and get your going. If the damage is significant and the vehicle needs to be towed to a garage, then the insurer has that organized too. RSA can also deliver up to 5 litres of fuel in case you run out of fuel in the middle of nowhere. 

Things to Note when Buying Leased Car Insurance

  • Leased car insurance is much cheaper for vehicles less than two years old. 

  • Though insurance premiums are pretty low for leased cars, the collision damage waiver (CDW) is usually overpriced. 

  • Unlike the cashless options you get for private vehicles, you have to pay upfront for damages and then file a claim. 

  • You are charged excess by the rental company in case you do not get a CDW. You are charged not only to fix damages to the vehicle but also for towing, the loss of business that will happen while the vehicle is being repaired and its loss in value post a major accident. 

Summing It Up

Car insurance is mandatory in India, whether the car is owned, rented or leased. Car Insurance for a Leased Vehicle varies significantly from the conventional insurance you get for privately owned vehicles. The coverage is usually less comprehensive but more expensive than standard insurance policies. It's always better to do a lot of research to get the right amount of coverage that will protect you from any financial liabilities down the line.  If you are looking to buy insurance and want a hassle-free experience,ACKO has some great insurance plans at affordable rates. 

Frequently asked questions

In this section, we will answer questions on the car insurance for a leased vehicle.

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 Is leasing a car cheaper than taking a loan to buy one?

Leasing a car has several advantages over taking a loan to buy a car. You don't have to pay a down payment, and nor do you have to worry about maintenance and service costs. That being said, it all depends on the model you choose to lease and how much you are willing to pay for insurance coverage. In a lot of cases, leasing is definitely more affordable than owning a vehicle.

What should I be aware of when buying leased car insurance?

Leased car insurance is different from standard insurance policies for owned vehicles. Here are a few things to note.

  • Check the terms and conditions of your leasing contract to see what exactly is covered. 

  • Buy only the coverage you need. Too much coverage will only increase costs unnecessarily. 

  • Compare prices between different insurance providers. Not all are the same. 

Is the collision damage waiver necessary? 

A collision damage waiver is not necessary, but is definitely recommended as it can save you a lot of money in the event that your vehicle suffers any minor damages. If you are renting a car that you know has expensive spare parts, then it would be even more beneficial to upgrade to a Super Collision Damage Waiver (SCDW).

Can I end my lease tenure early? 

Typically, car lease contracts have set terms, and it may be difficult to terminate them early. The majority of dealers add a clause for terminating the lease early. This could result in additional fees. You should review your lease agreement to understand the costs associated with terminating it.

How can I reduce my leased car insurance premiums?

The best way to bring down your leased car insurance premiums is to get quotations from different insurance providers, and negotiate with their competitor's quotes. You may automatically be eligible for lower premiums if you have a clean driving record.

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