A vehicle lease is different from a purchase because the driver must return the vehicle at the end of the leasing contract. The lessee does not own the vehicle and, as a result, must adhere to the lease company’s requirements to maintain the contract. This includes registering and insuring the vehicle under the same name as the leasing agreement.
Breach of Contract
Drivers who fail to register and insure their leased vehicles under the same name as the leasing contract are in breach of their leasing contract. This breach can result in the leasing company rescinding the contract, repossessing the vehicle and the driver being responsible for the full balance of the leasing contract.
Special exceptions can be made under the leasing contract to allow the registration and insurance to be placed in a different name. In most cases, these exceptions are made for business entities. Individuals should always speak with their dealership or leasing company to inquire on those options.
Most leasing companies require the lessee to maintain bodily injury and property damage liability limits of $100,000 per person, $300,000 per accident with $50,000 to $100,000 in property damage liability, or higher. Like the registration requirements, some exceptions may be made for the lessee to carry lower liability limits. Still, these exceptions must be approved by the leasing company. The failure to comply with these insurance requirements can result in the leasing company force-placing insurance coverage on the vehicle. If this occurs, the leasing company will insure the vehicle under its own insurance policy and add the additional premium to the lessee’s monthly leasing payment.
Along with the required liability coverages, leasing companies also require the lessee to maintain physical damage coverages on the vehicle. To do so, the lessee must carry comprehensive and collision coverage on his policy which will insure the vehicle against fire, theft, acts of nature, damage from animals, vandalism and damages caused by colliding with another object. In most cases, the leasing company applies no restrictions to the lessee’s deductible choices for these coverages. Still, the lessee should refer to his leasing contract or company for any applicable requirements.
Writing professionally since 2004, Charmayne Smith focuses on corporate materials such as training manuals, business plans, grant applications and technical manuals. Smith's articles have appeared in the "Houston Chronicle" and on various websites, drawing on her extensive experience in corporate management and property/casualty insurance.