Insurance Requirements for Leases

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A lease is a legal agreement between two parties involving a piece of property. The person or company offering the property--the leasor--promises to deliver and maintain the property. The person who will possess the property--the leasee--agrees to pay a certain amount, usually per month. To protect the property or lower the risk of being sued, the leasor can require the leasee to carry insurance on the property. In most states, auto insurance is mandatory, regardless of the lease agreement.

Renter's Insurance

  • Many leasing contracts require a renter to purchase renter's insurance to protect the personal property. Leasing companies carry insurance on the structure, but this coverage does not include the items inside the dwelling. Although it might not seem as if there is anything of value to insure, the cost to replace everything one owns is costly. Renter's insurance will cover everything from the television to a pair of flip flops.

Car Lease Insurance

  • When leasing a car, most auto lease companies require at minimum the following limits: $100,000 per person and $300,000 per occurrence; property liability coverage of $50,000; and comprehensive and collision coverage for actual value with a maximum deductible of $500. These limits ensure that the leasing company recoups its losses in the event the car is involved in an accident or is stolen. It also lowers the risk of financial ruin for the leasee, in the event the leasee is held responsible for an accident.

Benefits of Leasing

  • When a home or automobile is leased, the responsibility of maintenance falls to the leasing company. This means a significant savings of maintenance costs for the leasee. For those who cannot afford the down payment to buy a home or a large car payment, leasing is a logical option. Most home leases are for 12 months, while most auto leases are for three years. At the end of the lease term in both cases, the lease can renewed. Or, the home renter can move and the car leaser can either return the car or opt to purchase it.

References

  • Photo Credit yellow car, a honda japanese sport car model image by alma_sacra from Fotolia.com
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