One of the most confusing things to deal with when leasing a car can be insurance. Do you need the same coverage as someone who owns a vehicle? Do you have any options that are specific to leasing? What type of insurance is the best for your situation? In this blog post, we’ll take you through a few different kinds of insurance, explaining what they are, how they work, and whether or not you need them, so you can make the best decision possible for your leased vehicle.
PLPD or Personal Liability and Property Damage Insurance
What is PLPD Insurance?
PLPD insurance or personal liability and property damage insurance is the legally required insurance in both Michigan and Indiana. It covers two different things (as you may have guessed from the name): personal liability and property damage. Personal liability refers to injuries caused to a person in a traffic collision, and property damage refers to damage done to a vehicle or structure such as a fence or mailbox during a traffic collision. Thus, PLPD insurance can help you cover expenses related to these two areas.
How Does PLPD Insurance Work?
Because different states have different laws, PLPD insurance works differently in Michigan than it does in Indiana.
Michigan PLPD Insurance:
Michigan is a “no-fault” state, which means that when a traffic collision occurs, your insurance covers your injuries, but will not cover any damage done to your vehicle.
Example: Let’s say you are in a car accident that causes your arm to break and your windshield to crack. Your PLPD will help you pay for the medical bills to have your arm treated, any wages you may lose from having to take time off of work, but will not cover the cost of your windshield. The other driver’s insurance will help them pay for any injuries they incur as a result of the collision.
Indiana PLPD Insurance:
Unlike Michigan, Indiana is an “at fault” state, which means that in the event of a traffic collision the person at fault is liable for all injuries and damages caused to them and the opposing party.
Example: Let’s say you are in a traffic collision caused by the other party running a red light. Your vehicle is t-boned. As a result, your arm is broken, and your driver side door is smashed in. The other driver receives a deep cut on impact and the front bumper of their car is completely destroyed. In this situation, the other driver is at fault because they ran a red light. Being at fault, they would be responsible for getting you a new door, paying for the medical bills resulting from treating your arm, and any lost wages you incur from needing to take off work. They would also be responsible for covering their new front bumper and the medical bills resulting from having their deep cut stitched up. Their PLPD insurance would help them cover damages and injuries caused to the other person and their vehicle, but not their own injuries and damages.
Do I Need PLPD Insurance?
It is required by law in Michigan and Indiana, so if you live in either of these states, you 100% need this insurance. You will not be able to lease a vehicle without proof of being insured.
What is Collision Insurance?
Collision insurance covers physical damage done to your vehicle or property in the event of a car collision. In Michigan, this is a must-have, being that no matter who is at fault in a car collision, you are responsible for any damages to your vehicle or other property. Your PLPD will not help you cover physical damages done to your vehicle in Michigan.
In Indiana, this can come in handy as well if you are found at fault. Your PLPD insurance will help you cover the expenses of the other driver’s car and property, but not damages done to yours, and you don’t want to pay for those expenses out of pocket.
How Does Collision Insurance Work?
Collision coverage has a deductible, which is the amount you pay out of pocket before your insurance company will assist you. For example, let’s say you get into a car accident and $5,000 worth of damage is done to your car. If your deductible is $1,000, you will have to pay $1,000 out of pocket and your insurance policy will cover the other $4,000. You typically have the option of choosing your deductible. Generally, the lower the deductible, the more expensive the policy.
Do I Need Collision Insurance?
We highly recommend that both Michigan and Indiana driver’s get collision insurance. In Michigan, you will be required to pay for damages done to your car in any collision that occurs. In Indiana, you will be responsible for damages done to your car if you are found at fault. You don’t want to pay for these expenses out of pocket in either situation.
What is Comprehensive Insurance?
Comprehensive insurance covers certain physical damages to your vehicle that aren’t caused by a traffic collision. This can include things like fire damage, water damage, damage from falling objects such as tree branches, as well as things like vandalism and theft.
How Does Comprehensive Insurance Work?
As with collision insurance, comprehensive insurance involves a deductible and works in a similar fashion. You will be responsible for paying damages less than or up to your deductible, and your insurance company will cover any expenses over. Both comprehensive and collision insurance also have a limit that the insurance company will pay. This is often the current cash value of your vehicle.
Do I Need Comprehensive Insurance?
If you live in an area where natural disasters, car break-ins, or car theft aren’t out of the ordinary, comprehensive insurance is a good idea for you. Even if you don’t live in such an area, it is definitely worth considering. If your car is stolen or heavily damaged outside of a car accident, you will be responsible for paying off the rest of your lease agreement completely on your own. It is always better to be safe than sorry.
Collision Damage Waiver
What is a Collision Damage Waiver?
A collision damage waiver or a CDW acts as insurance for a leased vehicle and covers damage or loss of the vehicle caused by collision, theft, fire, water, and falling objects, etc. If this sounds familiar, it is because this is the same type of coverage offered by collision and comprehensive insurance.
How Does a CDW Work?
If you do not have full coverage (the name given to coverage that includes both collision and comprehensive insurance), your leasing company may require you to sign a CDW. We cannot speak for other companies, but at Car City, our CDW works as follows.
If you notify us of a vehicle loss and we determine your vehicle is a total loss, the lease will end and you will pay a deductible of $500 and any amounts already due under the lease before the date of the loss.
If you notify us of a vehicle loss and we determine the vehicle is not a total loss, we will make commercially reasonable efforts to repair any damage resulting from the vehicle loss within a reasonable time. You will pay a deductible of $500.
You will need to continue to pay all amounts due under your lease even while you are waiting for us to make repairs. You must also agree to pay 100% of any repairs you make yourself or have a third party make.
Do I Need a CDW?
Most leasing companies will require you to have either full coverage or a CDW to lease a vehicle, so you will need one or the other. In addition, the law requires PLPD; a CDW does not replace PLPD. CDW’s tend to be more affordable than full coverage, so if you want to keep your expenses low, this may be the way to go. However, you will most likely have less freedom with your CDW than with a full coverage policy because leasing companies typically have a standard waiver you must commit to.
When you purchase full coverage, you will be able to choose your deductible, which will affect your monthly rates. If you want to pay less out of pocket in the event that damage is done to your vehicle you could choose a lower deductible and pay a higher monthly rate. Conversely, if you want a very low monthly rate, you could choose a high deductible.
What is GAP Insurance?
GAP insurance is a type of insurance that is used in the event that your leased vehicle is damaged beyond repair. If you experience a traffic collision that destroys your vehicle and you owe more on your lease than what the car is worth at the time of the collision, GAP insurance can help you cover the difference.
How Does GAP Insurance Work?
Let’s say you owe $10,000 on your leased vehicle when you experience a collision. Your car has depreciated in value since you began your lease, so it is now valued at $8,000, meaning you owe your leasing company more than the car is now worth. If you have collision insurance, your insurance company will cover the cost of what the car is currently worth after your deductible is met. If your deductible is $1,000, you will have to pay $1,000 dollars out of pocket, and your insurance company will cover the remaining $7,000 to meet the current value of the car ($8,000) Since you still owe $10,000 on the vehicle, you are $2,000 ($10,000 – $8,000 = $2,000) in the hole. GAP insurance can help you cover this $2,000 so you do not have to pay anything else out of pocket. It is important to remember that GAP insurance will not cover any payments due on your lease prior to the accident.
Do I Need GAP Insurance?
Most leasing companies require GAP coverage and for good reason. You probably don’t plan on crashing your vehicle — no one does — but accidents happen. GAP insurance is an invaluable safety net to have if you find yourself in an unfortunate situation down the road. Here at Car City, you automatically get GAP insurance as a part of your lease agreement with us.
Are You Ready to Lease a Vehicle?
You now know a little bit about the different types of insurance you may need or want when leasing a vehicle in Michigan or Indiana. If you are ready to move forward with the leasing process, we at Car City can help. We have hundreds of used cars of a variety of makes and models in our inventory. And with locations across Michigan and Indiana, visiting us should be a breeze. Get pre-approved online now or schedule a visit with us!