We contacted the New York Insurance Department to get information on your situation since to the best of our knowledge NY state law does not require one with a lease to obtain GAP insurance but that a leasing company has the right on their own to require this as part of the finance agreement.

The NYS Insurance Department said that your question does not fall under NYS Insurance Law. You would need to contact the agency which has jurisdiction over the finance company. This is the NYS Banking Department.

Therefore, insurance laws do not require GAP insurance to be placed on a leased vehicle. We thus contacted the Banking department to see what information they can tell us regarding your situation. They responded by advising us this is not a banking law or regulation and that you should ask the dealership what New York law they are referring to that requires those that lease cares to obtain GAP insurance.

We have read that if a lender of leased cars in New York requires GAP insurance to be purchased than they must include the GAP insurance within the cost of the lease itself. This means that the monthly price quoted by the dealer must include GAP insurance when they require this coverage, perhaps this is what the dealer was referring to. It is common for Lease contracts to have GAP insurance.

According to the Insurance Information Institute (III) many lease contracts do require GAP insurance. States do have various laws regarding GAP insurance. With regards to GAP insurance and leased vehicles in New York you can read through NY Personal Property Law (PPL) which governs motor vehicle installment sales and defines the obligations that a creditor has to a buyer with regard to the offering of GAP waivers. PPL Article 9-A deals with motor vehicle lease contracts. Sections 335 (Total loss notice and waiver of the GAP amount) and 337 (Requirements as to retail lease agreements) may be of special interest to you considering what the dealership has told you about GAP insurance.

GAP insurance and GAP waivers are mentioned in the NYS PPL. GAP insurance has the insurer paying the GAP between the actual cash value (ACV) of a totaled out vehicle and the balance of a loan. A GAP waiver is different in that it is an agreement under which the creditor agrees to waive the lessee or debtor’s obligation for the difference between the "gap amount" and the actual cash value of the property.

In NYS an automobile dealer must be licensed as an insurance agent or broker to sell GAP insurance on behalf of an insurer, but an automobile dealer may offer a GAP waiver, as it is not considered doing insurance business as long as three conditions are met. NY Insurance Law section 1101 (b) provides for this GAP waiver exemption.

On a leased car, the cost of GAP insurance or waiver is generally rolled into the lease payments however according to the New York Insurance Department and NYS Banking Department it is not a law that you have to carry GAP insurance on a leased vehicle. If the dealership is telling you that it is New York law that you buy GAP insurance than you will need to ask them where you can read this law or find out if it is really just a requirement / guideline of this dealership that GAP insurance is purchased for leased vehicles.

If you would owe more on a leased vehicle than its ACV if it was totaled out during your leasing period than GAP insurance or a GAP waiver would be helpful so that you would not be left paying on a car you no longer had use of if it was declared a total loss.