While many lease contracts may require GAP insurance it is not required by state law and instead is an optional coverage. States do have various laws regarding GAP insurance so you can check with your state to see if Gap insurance is mandated to be covered in any specific situation, likely it is not by state laws.

Some state laws may require that Gap insurance be offered to those with a lease or even a person that is upside down on a loan, in general state laws do not mandate this and instead allow a person to choose this coverage if they want it or not. Lien holders though, meaning a leasing or financing company, may if state laws allow require you to obtain Gap insurance.

GAP insurance can provide valuable protection during the early years of your car's life whether you lease a car or have an outstanding auto loan. As you are aware the value of a new car drops the minute it is driven off the lot. And unfortunately, if a negligent motorist crashes into the side of your new vehicle 2 hours after you drive home for the first time; your insurance will only cover the actual cash value of the car. Since the car is now "used" at this point, there is a good possibility that the insurance payoff for ACV will not be enough to pay off your outstanding lease (or loan) balance.

GAP insurance will pay the difference between the actual cash value of the vehicle and the current outstanding balance on your loan or lease. Some lenders and lessors will require you to carry GAP coverage until the outstanding loan/lease amount drops below the value of the vehicle, though this may only be stated in paperwork and the insurance will not be automatically placed on the vehicle by the lender.

In many cases on a leased car, the cost of gap insurance will be rolled into the lease payments. The auto dealer you are leasing from may buy a master policy from an insurance company to cover all the cars it leases and charge you for a gap waiver or gap insurance.

To find out your state's specific laws regarding Gap insurance contact your state's insurance regulator.