UCIP coverage extends to vehicles that are leased by a member, for both liability and physical damage, generally in the same manner as if they were owned by the member.
Many members have increased the use of leased vehicles as the cost of lease contracts have been very favorable in recent years. While the base lease cost may look to provide savings, members should consider the extra costs many lease agreements call for if the vehicle is damaged during the lease term in their decision to lease or own.
In review of several lease agreements being presented to members from lease companies, many have provisions that obligate the member to pay the leasing company more when the vehicle is damaged than what a member’s coverage would provide for an owned vehicle. UCIP will provide coverage for a leased vehicle the same as if it were an owned vehicle, so the member is responsible for any additional costs they agree to in the lease agreement.
The first lease term that is problematic is that the leasing company wants the ability to decide if a vehicle is totaled or if it should be repaired. UCIP, and any insurance company, will pay the lesser of the cost to repair or replace the vehicle. If UCIP feels the cost to repair the vehicle is less than the cost to replace it, the member will receive the estimated cost to repair, yet they may be obligated under the lease agreement to pay the leasing company the purchase price, amortized deprecated value or some other value which is higher than the cost to repair. The amounts stated in many lease agreements are also higher than the actual cash value of the vehicle, which is what UCIP would pay even if it is agreed the vehicle is totaled.
In addition, many lease agreements also require a penalty if the vehicle is totaled, usually equal to several months lease payment. This is another cost not covered by UCIP, as there would be no such penalty if the member owned the vehicle.
UCIP recommends you review the vehicle lease agreement closely to determine if these additional costs are applicable. Because some leases are not very clear on these issues, UCIP will assist in review of the lease to determine what additional costs the member may have in the event the vehicle is damaged.
If a member decides to lease even when these terms are included in the lease agreement, you may want to consider placing some of the savings in a fund to cover these extra costs.
The one exception to providing the same coverage to leased vehicles as is provided to owned vehicles is the provision for “New for Two” coverage, which allows a vehicle less than two models years old that is totaled to be replaced with a current model year vehicle, but only if the vehicle is owned by the member.