What Happens If You Stop Insurance on a Leased Vehicle?

Dropping insurance coverage on a leased vehicle has its consequences. Just as when making payments on an auto loan, when leasing a vehicle auto insurance protects the lien holder from loss.

Auto lease contracts may vary somewhat but all lease agreements contain a disclosure statement covering insurance requirements, excess wear and tear, mileage, early termination and a section outlining what happens if the vehicle is stolen or destroyed.

Lease agreements detail the coverage a lessee (person who is leasing) is required to carry. You will be required to pay for this yourself.

Your contract will most likely require all the basic coverage including bodily injury, death, liability, property damage, comprehensive and collision with specified coverage limits and deductibles outlined. Check with your state's department of insurance to find out what your legally required minimums are as well.

If you fail to keep your leased car insured, the lessor may repossess your car. If this is the case, it will be spelled out in the lease agreement.

Alternatively, lessors can purchase “forced” insurance to protect their interest in the vehicle, adding these costs to your payments plus fees and penalties.

Dropping auto insurance coverage on a leased vehicle can expose you to liability, is illegal under the law and can wreck your credit rating.