What Are the Insurance Requirements of a Leased Vehicle in Canada?

When Sarah leased her first car in Ontario, she believed that her standard auto insurance would suffice. However, she soon learned that leasing contracts in Canada impose stricter insurance requirements than those for general vehicle ownership. 

After an accident damaged her leased vehicle, she was grateful she had the right coverage, especially gap insurance. Without it, she would have had to pay thousands out of pocket. 

Her experience shows exactly why understanding the insurance requirements for leased cars in Canada matters.

Mandatory Coverage: What Every Driver Needs

In Canada, basic auto insurance is mandatory and includes third‑party liability, accident benefits, and, depending on your province, uninsured motorist and direct compensation‑property damage (DCPD). 

More specifically:

• Third-party liability minimums vary: Ontario typically requires $200,000; Nova Scotia $500,000; Quebec $50,000 for property damage.
• Accident Benefits are required nearly everywhere except Newfoundland and Labrador. 
• Uninsured motorist coverage is mandatory in most provinces to protect against hit-and-run or underinsured drivers.
• DCPD coverage applies in no‑fault provinces like ON, QC, NS, NB, and PEI.

These are just the basic statutory minimums for any vehicle, leased or owned.

Lease‑Specific Insurance Requirements in Canada

Leasing companies almost always demand additional coverage beyond basic requirements to protect their investment.

Comprehensive & Collision Coverage

Lease agreements typically require both comprehensive (non‑collision incidents like theft or weather) and collision coverage (damage from accidents), often stipulating low deductibles, such as $1,000 or less. 

Higher Liability Limits

While provinces mandate minimum liability, leasing contracts often require limits of $1 million to $2 million, regardless of provincial floor.

Loss‑Payee or Lessee Protection Endorsements

Leessees must add the leasing company as a loss payee or named insured. In Ontario, this is OPCF 5; Quebec has a similar Q.E.F. No. 5a endorsement.

Gap Insurance / Waiver of Depreciation

Since a leased vehicle often depreciates quickly, gap insurance covers the difference between insurance payout and the lease balance if the vehicle is totaled. For instance, if you still owe $30,000 but the vehicle is judged at $20,000 in market value, gap insurance covers the $10,000 gap.

How These Insurance Requirements Affect You and Your Vehicle in Canada

Leasing doesn’t inherently raise your premium, but insurance requirements do. Coverage must meet both provincial and lease contract terms. As a result, leased vehicles often necessitate higher coverage limits, comprehensive and collision policies with low deductibles, and gap or depreciation waiver insurance, which together increase annual costs.

Lessees also must notify their insurer that the car is leased to ensure correct endorsements, or risk gaps in coverage.

Provincial Variations: What You’ll Need by Region

Canada’s auto insurance system varies by province. Coverage must satisfy both public insurance requirements (in BC, SK, MB, QC) and private sector standards in other regions. 

British Columbia (ICBC)

From January 2025, ICBC lessees are policyholders and manage insurance, although vehicles remain registered under the lessor. A Letter of Authorization is no longer required for policy changes. However, the leasing contract still dictates coverage mandates, full coverage is typically required throughout the lease.

Ontario & Other Private‑Insurance Provinces

Standard provincial minimums don’t satisfy lease terms. Ontario lessees must carry $1M+ liability, comprehensive & collision with caps on deductibles (often $1,000), and gap or depreciation waiver insurance, plus a loss‑payee endorsement (OPCF 5).

Quebec

Quebec mandates $50,000 minimum liability coverage via SAAQ, but the requirements for a leased vehicle are comprehensive and collision insurance via private insurers as well. Lease contracts often stipulate Canadian Dealer Lease Services as named insured plus endorsement Q.E.F. No. 5a.

Real-World Case Study: How the Right Insurance Saved a Lease

In Alberta, Emily leased a high‑end SUV. Five months later, it was totaled in a multi-car collision. She had gap insurance, and the insurer covered the full market value. Because of the loss‑payee endorsement, the leasing company was promptly paid off, and Emily avoided paying interest or residual fees. 

She learned her lesson: even if your lease doesn’t insist on it, gap insurance protects your finances when the worst happens.

How to Secure the Right Insurance Coverage for a Leased Vehicle in Canada

Having seen the basic insurance requirements of a leased vehicle in Canada, here’s my advice for lessees who want to choose the right coverage:

1. Check Your Lease Agreement Carefully

Always review the lease documents for explicit coverage requirements related to liability limits, deductibles, and endorsements.

2. Add the Lessors as Named Insured

Ensure your insurer knows they must include the leasing company on the policy—often via specific province endorsements like OPCF 5 or Q.E.F. 5a.

3. Maintain Required Physical Damage Coverage

Don’t drop or reduce comprehensive or collision coverage just because you own the policy. Most leases prohibit it.

4. Buy Gap or Depreciation Waiver Insurance

If not included in the lease, consider purchasing gap or waiver-of-depreciation insurance separately. It can save you thousands in case of total loss.

5. Keep Thorough Documentation

Keep a copy of lease, insurance policy, endorsements, and correspondences. This streamlines claims and protects you against disputes.

6. Review and Update Regularly

If you move, change drivers, or alter policy terms, check whether coverage still complies with your lease agreement.

Summary Table: Lease vs. Ownership Vehicle Insurance Requirements in Canada

Final Thoughts

Leasing a vehicle in Canada requires more than just making timely payments. You must ensure your insurance meets lease‑specific mandates. These specific mandates include liability limits, comprehensive and collision coverage, low deductibles, and gap or depreciation waiver endorsements. 

Not only does this protect the leasing company’s asset, but it also shields you from significant financial liability in case of loss. 

As a seasoned insurance broker, I routinely guide clients to review lease agreements, buy the right endorsements, and avoid surprises. If you’re planning to lease, I strongly recommend discussing your insurance plan with a qualified broker before driving off the lot.