If you lease a car in Colorado, you still need to buy your auto insurance policy. The auto dealer or bank that is financing the car will require you to purchase collision and comprehensive coverage and other state-mandated coverages like liability insurance.

• Collision covers the damage to the car from an accident with another automobile or object.
• Comprehensive covers a loss caused by something other than a collision with another car or object, such as a fire or theft, or collision with a deer.

The leasing company may also require “gap” insurance. If you have an accident and your leased car is damaged beyond repair, there could be a difference between the amount that you still owe the auto dealer and the check you’ll get from your insurance company. That’s because the insurance company’s check is based on the car’s actual cash value, which accounts for depreciation. The difference between the two amounts is known as the “gap.”

On a leased car, the cost of gap insurance is generally rolled into the lease payments. You don’t buy a gap policy. Typically, the auto dealer buys a master policy from an insurance company to cover all the cars it leases and charges you for a “gap waiver.” If your leased car is totaled, you won’t have to pay the dealer the gap amount. Check with the auto dealer when renting your car.

If you have an auto loan rather than a lease, you may want to buy gap insurance to protect yourself from coming up with the gap amount if your car is totaled before you’ve finished paying for it. If you have questions about this coverage, please call our office.