You will need to have adequate car insurance coverage in place in both instances. You will want to make sure the car is protected from physical damage by putting collision and comprehensive protection in place. If the car is leased, you will also want to consider adding gap coverage to your policy in case the car is totalled during the term of the lease. Third party liability protection will also need to be put in place to comply with your state’s financial responsibility laws.
Collision and Comprehensive Car Insurance Coverage
Collision coverage pays out when the damage to the vehicle is caused by striking another car or an object. Comprehensive car insurance coverage is used to pay for physical damage caused by other types of events. It pays out when the loss is due to wind, hail, flooding, stones striking the windshield, fire or vandalism. It also pays out if the car is stolen and not recovered.
If the car is totalled in the accident, the insurance company pays out based on the vehicle’s cash value, not its replacement value. A driver can easily find him or herself owing more on a vehicle than its cash value, since the car starts to depreciate the minute the driver leaves the dealer’s lot with it.
Gap Insurance Coverage
To avoid being caught in a situation where collision or comprehensive car insurance coverage does not cover the amount owing on a car loan or a lease, consider putting gap insurance in place. It makes up the difference between what is owed on the vehicle and its cash value.
This add-on coverage can be provided by your main car insurance provider or you can request a quote from a different company for stand-alone coverage. Take some time to study quotes received for this type of coverage before making a decision. Pricing and policy terms will vary, depending on the company providing a quote.
Third Party Liability Car Insurance
Third party liability coverage pays out when the occupants of the other vehicle make claims against the insured driver following an accident. It is made up of two types of coverage: bodily injury and property damage liability.
Bodily injury liability insurance pays for personal injury claims and covers medical and rehabilitation costs incurred as a result of the accident. It also pays out for lost wages incurred by accident victims traveling in the other vehicle. In some states, the bodily injury liability part of a policy also pays for claims for compensation for pain and suffering.
Property damage liability coverage pays for the cost of repairing the other driver’s car following an at-fault accident. It also pays to repair or replace public property damaged or destroyed in the incident. Fences, sheds, buildings, mail boxes and sign posts.
To find the best prices on car insurance whether you choose to lease or buy a vehicle, make a point of shopping around for coverage. Compare rates and coverage terms from several companies before making your decision.