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Car lease protection insurance

Car lease protection insurance can protect you from defaulting on your car repayments if you become ill or unemployed. However, other options are available.

When leasing a car, you're responsible for paying a minimum amount to the car dealership every month (or your agreed upon cadence). Car lease protection insurance is designed to help you should you find yourself in a situation where you're unable to make those repayments. It is a lot like specialised income protection insurance specifically for your car lease.

How does car lease insurance work?

Car lease protection insurance can pay out in circumstances such as involuntary employment, death or total loss of car in an accident. The exact benefits paid out depend on the terms of your policy, the terms of your lease and the situation at hand.

Lease protection for unemployment: For example, if you lose your job and can't make repayments you might have the choice of keeping the car, selling it or handing it back to the dealer.

  • If you choose to keep the car, the insurance policy can help you keep up with payments until you find a job.
  • If you choose to hand it back or sell it, your policy might pay the total amount left owing, minus the market price of the car.

If you opt to keep the car, the repayments required by your policy may vary. For example, one policy might make you pay one-thirtieth of the minimum monthly repayment for up to 120 days, while another policy might pay out a single lump sum.

Lease protection for death or vehicle loss: In the event of death, policies may pay out the remaining amount owed on the lease. In a total loss situation where the car is written off after an accident, your policy might pay benefits equal to the difference between your car insurance payout and the amount left owing on the lease.

Car lease policies can vary widely, and these are just some of the terms you may encounter. For example, involuntary employment is the focus of many policies, but not all options will include death cover. Reading your policy closely is key to understanding the type of cover it offers.

What are my car lease protection options?

Car lease insurance may be found with car finance plans, or through car dealers and auto specialists. As always, it's a good idea to compare available options and get multiple quotes rather than taking whichever policy your car dealer, or lender, offers.

Car lease insurance isn't the only way to get this type of cover; you may also want to consider gap insurance or income protection cover.

  • Gap insurance: Gap insurance is much like car lease protection insurance that focuses on vehicle loss. It will typically pay the difference between your car insurance payout and any finance left owing on your vehicle at the time. You might think of it as a narrower and more specialised form of car lease protection.
  • Income protection insurance: This functions much like a wider and more broadly usable form of protection insurance. It typically pays out in a wider variety of situations, including unemployment resulting from injury or disability, and will often give you more flexible options. Instead of paying specifically for the car loan, it pays out a proportion of your usual earnings while you're out of work and then lets you spend it on what is needed, including car loans or leases.

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2 Responses

    Default Gravatar
    NikOctober 30, 2023

    Is there a way to search specifically for car lease insurance?
    There doesn’t seem to be any options when searching comprehensive car insurance

      AvatarFinder
      PetaNovember 6, 2023Finder

      Hi Nik,
      Car lease insurance is a seperate product to comprehensive car insurance. Comprehensive car insurance won’t cover your lease repayments in the event of income loss; it’d likely only cover your repayments in the event of an eligible accident where the car is written off. For lease insurance, you’ll need to look at different providers.
      I hope this helps.

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