Auto Insurance Coverage for Leased and Rented Vehicles

A rental car or leasing company may not be required to provide automobile insurance coverage for its renters or lessees during the rental or lease period. Further, an insurer of a renter or lessor can exclude any liability coverage for their customers. The specific provisions of a vehicle rental or lease agreement should be carefully reviewed to decide whether minimum insurance coverage is provided for renters or lessees.

State law should also be consulted because some states require rental car companies to maintain insurance for their customers. Generally, a lessor must meet the financial responsibility or insurance standards for owners of motor vehicles as required by state law. Some states determine ownership of a leased vehicle for insurance purposes based on the length of the lease. For instance, if a lease agreement entitles the lessee to use the vehicle for over one year, the lessee would be the vehicle owner for insurance purposes. If the lease were for less than one year, then the lessor would be the vehicle owner for insurance purposes.

A lessor may be obligated to provide collision and personal accident insurance to a lessee, but it may not be required to provide third-party liability coverage. If a self-insured vehicle rental company offers liability insurance, it must give a renter the opportunity to expressly accept or reject the coverage.

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