If you decide to lease a car instead of buying it outright, you will need to buy collision and comprehensive coverage, as well as gap insurance. The dealership will want to protect its interests to make sure that it will be compensated if the car is damaged or stolen during the term of the lease.
Collision coverage pays out if the car needs to be repaired after an accident. It will also pay out if the vehicle is damaged to the extent that it cannot be repaired. In that case, the insurance company writes a check for the cash value of the car.
If the driver owes more on the car than what the cash value is, he or she will be responsible for paying the difference to the lender. To guard against this type of situation, gap insurance coverage is available. It is used to pay the difference between what the driver still owes on the lease and what the car is worth. This type of coverage can be added to a policy easily and is worth the additional costs to avoid making payments on a car that is no longer drivable.
Comprehensive car insurance pays out for damage caused by events other than a collision. If the car is damaged by flooding, fire, an act of vandalism or severe weather, this is the portion of the policy that will pay out. Comprehensive insurance also covers a loss due to theft.