Gap insurance is not mandatory by law, but it can be a wise investment for certain drivers. It covers the difference between what you owe on your car loan or lease and the car’s actual cash value if it’s totaled in an accident or stolen. While most states don’t require gap insurance, your lender or leasing company might. They often suggest or mandate it to protect their investment, particularly if you have a large loan or lease with little equity. For those who finance or lease their vehicle, especially with minimal down payments, gap insurance can provide valuable financial protection and peace of mind.