Gap Insurance in New York (2024)

If someone steals or totals your financed or leased vehicle in New York, you’ll be responsible for paying off any outstanding loan balance. Since cars lose value quickly, your full-coverage insurance payout could be less than what you owe on your vehicle.

Gap insurance can cover any difference between your claim payout and loan balance. But in New York state, it’s up to you to take the initiative to buy it.

State laws don’t require auto loan companies to offer gap insurance when you finance a car. And the state bars lenders from requiring you to buy gap insurance as a condition of getting a loan.^[1]

Here’s what you need to know about buying gap insurance in New York.

What is gap insurance, and how does it work in New York?

A vehicle is a depreciating asset. Its actual cash value decreases as you drive it. If its value goes down faster than your loan balance, you may owe more than the car is worth — a situation known as negative equity. Negative equity can occur if you took out a loan for more than five years or didn’t put enough money down.

Car insurers base claims payout amounts on what vehicles are worth at the time of an accident. And they’ll pay it to your lien holder, not you. 

If someone steals or totals your car, your insurance settlement may not be enough to pay off the full remaining balance on your loan. Gap insurance — also called guaranteed asset protection — repays any loan balance remaining after your auto insurance policy pays.

New York state law requires lenders and leasing companies to tell you in writing if they’ll hold you responsible for your full loan balance in case of a total loss.

Best gap insurance companies in New York

You have several options to choose from when buying gap insurance in New York. Here’s a list of the best insurance companies in New York that offer the coverage.

Allstate

Liberty Mutual

Nationwide

Progressive

Travelers

How to buy gap insurance in New York

The most affordable way to buy gap protection in New York is to call your insurance agent and add the coverage to your existing car insurance policy. You can purchase a stand-alone policy through a car dealership or a lender, but it’s typically cheaper to buy the coverage as an add-on with your car insurance company.

What gap insurance covers in New York

Gap insurance covers the difference between the current value of your car and what you owe on your car. It doesn’t cover any medical bills or car repairs following an accident.

For example: Let’s say you purchase a $30,000 car with a $27,000 loan and drive it for a year before you have an accident that totals your vehicle. You have collision coverage with a $500 deductible.

By the time of your accident, your car has depreciated in value by about 20%, so it’s now worth $24,000. Your collision coverage will pay out $23,500.

You’ve made some payments on your auto loan but still owe $26,000 at the time of your accident. Gap insurance can cover the difference between what your vehicle is worth and your remaining loan balance. In this scenario, your policy would cover the $3,000 gap.

Gap insurance vs. full coverage

Full-coverage auto insurance adds collision and comprehensive coverages to basic liability insurance. The coverages can pay to repair physical damage to your vehicle. Full coverage may also include medical payments coverage.

While you can have a full-coverage policy without gap insurance, you’ll never have gap insurance without full coverage. That’s because lenders and leasing companies typically require drivers to buy full-coverage policies to protect their investment.

Here are key differences between gap insurance and full coverage:

Who needs gap insurance in New York?

New York law doesn’t require drivers to purchase gap insurance, but your financial institution or dealership might.^[5] Some drivers should consider purchasing gap insurance for more financial protection.

You should consider purchasing gap insurance if you:

• Took out a long-term car loan of more than 60 months

• Made a small down payment

• Rolled negative equity from an old vehicle loan into a new car loan

• Have a lease and the auto lender requires it

• Have a vehicle known for depreciating quickly

Drivers who made a large down payment or secured a car loan for 60 months or less don’t typically need gap insurance. But drivers who are risk-averse and prefer buying additional coverage can benefit from the confidence and peace of mind gap insurance provides.

Dan Stous, a certified financial planner (CFP), explains that dealerships often try to get you to purchase add-on products that aren’t useful when you’re buying a new car.

“Gap insurance is one of those products that is actually something to consider,” he says. Stous explains gap insurance can also benefit drivers without a lot of personal cash of their own.

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How much gap insurance costs in New York

The cost of gap insurance in New York will vary based on your driver profile, vehicle type, and insurer. Adding gap insurance to your policy typically costs between $20 and $40 annually, but it can cost more if you buy it separately through a dealership or lender.

You can see the average monthly cost of insurance for leased cars from New York insurers below. The following table shows average full-coverage car insurance rates for leased vehicles covered by top insurers in New York.

Gap insurance in New York FAQs