Question 1

What Is Car Insurance?

Accepted Answer

Car insurance is a contract between you and an insurance company that helps protect you financially after accidents, damage, theft, or liability claims. In exchange for a premium, the insurer agrees to cover specific losses outlined in your policy. Leased vehicles typically require broader coverage than minimum state requirements.

Question 2

What Is Liability Insurance?

Accepted Answer

Liability insurance pays for injuries and property damage you cause to others in an at-fault car accident. It is required by law in most states and is often required at higher limits for leased vehicles. Liability coverage typically includes bodily injury liability and property damage liability.

Question 3

What Is Comprehensive Car Insurance?

Accepted Answer

Comprehensive car insurance covers damage to your vehicle from non-collision events such as theft, vandalism, fire, weather-related damage, falling objects, and animal strikes. It is commonly required for leased vehicles as part of physical damage coverage and usually includes a deductible.

Question 4

What Is Collision Insurance?

Accepted Answer

Collision insurance pays to repair or replace your vehicle after a collision, regardless of who is at fault, up to your policy terms. It generally applies when you hit another vehicle or object, or in a rollover. Most leases require collision coverage with a deductible that meets lease guidelines.

Question 5

What Is a Deductible in Car Insurance?

Accepted Answer

A deductible is the amount you pay out of pocket before your insurer pays for a covered claim. Deductibles usually apply to comprehensive and collision coverage, not liability. Higher deductibles generally lower premiums, while lower deductibles increase premiums, and many leases limit the maximum deductible allowed

Question 6

What Is Gap Insurance for a Leased Car?

Accepted Answer

Gap insurance covers the difference between your vehicle’s actual cash value payout and what you still owe on your lease after a total loss, such as a severe accident or theft. This protection is important for leased vehicles because depreciation can create a payoff gap. Some leases include gap coverage automatically.

Question 7

What Is Uninsured and Underinsured Motorist Coverage?

Accepted Answer

Uninsured and underinsured motorist (UM/UIM) coverage helps protect you if you’re hit by a driver with no insurance or not enough insurance. Depending on your state and policy, it may help cover medical expenses, lost wages, and sometimes vehicle damage. UM coverage may also apply to hit-and-run accidents, subject to local rules.

Question 8

What Are Car Insurance Premiums?

Accepted Answer

A car insurance premium is the amount you pay to keep your policy active, often billed monthly, semi-annually, or annually. Premiums are influenced by factors like driving history, vehicle value, coverage limits, deductibles, and location. Leased vehicles often cost more to insure because leases typically require higher limits and full physical damage coverage.

Question 9

What Is a Car Insurance Policy Period?

Accepted Answer

A car insurance policy period is the time frame during which your coverage is active, with a defined start and end date. Most policies run for six months or one year. Leases usually require continuous coverage, so letting a policy expire can violate lease terms and may lead to forced insurance.

Question 10

What Is Proof of Insurance?

Accepted Answer

Proof of insurance is documentation that confirms your vehicle is insured and shows key policy details such as the policyholder, vehicle, effective dates, and insurer information. Common forms include an insurance ID card, a digital version in an insurer’s app, or a printed copy. Requirements vary by state and lease agreement.

Question 11

What Is an Insurance Binder?

Accepted Answer

An insurance binder is a temporary document from an insurer that proves coverage is active before the full policy documents are issued. Leasing companies often require a binder before delivery so you can take the vehicle home. Binders typically last up to 30–60 days or until the policy is finalized.

Question 12

What Is a Lapse in Car Insurance Coverage?

Accepted Answer

A lapse in car insurance coverage is any gap in active insurance protection, even for one day. Lapses are risky for leased vehicles because they can violate lease terms and trigger forced insurance. A lapse can also increase future premiums and leave you personally responsible for damages during the gap

Question 13

What Is Underwriting in Car Insurance?

Accepted Answer

Underwriting is the process insurers use to evaluate risk and decide whether to offer coverage, at what price, and under what terms. Underwriters may review driving and claims history, vehicle details, location, and other legally permitted factors. For leased vehicles, underwriting helps ensure the policy meets lease requirements.

Question 14

What Is Primary Auto Insurance?

Accepted Answer

Primary auto insurance is the policy that pays first when more than one policy could apply to a claim. It provides the first layer of coverage before any excess or umbrella insurance. For leased vehicles, your primary policy usually must include liability, collision, and comprehensive coverage that meets lease requirements.

Question 15

What Does Named Insured Mean on Car Insurance?

Accepted Answer

The named insured is the primary policyholder listed on an auto insurance policy and typically controls the policy, including coverage choices, payments, and changes. In a personal lease, the lessee is usually the named insured and is responsible for keeping coverage active and compliant with lease requirements.

Question 16

What Is an Additional Insured on Car Insurance?

Accepted Answer

An additional insured is a person or organization added to a policy for limited liability-related protection, depending on the insurer and endorsement language. In personal auto insurance, leasing companies are more commonly listed as a loss payee or additional interest for physical damage coverage rather than as a true additional insured.

Question 17

What Is a Loss Payee in Car Leasing?

Accepted Answer

A loss payee is a party with a financial interest in a leased vehicle, typically the leasing company. Listing the lessor as loss payee helps ensure insurance payments for covered physical damage protect the lessor’s interest and are applied to repairs or settlement according to the lease agreement.

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What Is Underwriting in Car Insurance?