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Guaranteed Asset Protection (GAP)

Guaranteed Asset Protection (GAP)

GAP Insurance covers the difference between the balance still owed on a covered lease or loan and the actual value of the covered vehicle in the case of a total loss or theft

The Need:

Throughout the life of an automobile loan or lease, the borrower or lessee may find themselves in a position of “negative equity” - meaning they owe more than what the vehicle is worth. The period of “negative equity” is known as the GAP. This situation is generally driven by the reality that automobiles depreciate at a faster pace than loans and leases are paid off. This is compounded in instances where borrowers roll previous negative equity into a new finance agreement or they only make a small down-payment. Negative equity and resulting GAP’s have become even more prevalent as loan and lease terms have gotten longer. Vehicles depreciate at the same pace regardless of the term of the lease or loan. However, the longer the term, the slower the loan or lease is paid down. All else being equal, the longer the loan or lease term, the more GAP exposure.

Traditional automobile coverage only covers the borrower or lessee up to the value of the vehicle. If more than that value is owed (in negative equity and therefore has a GAP), the borrower or lessee will have to come out of pocket to pay off the loan or lease. Many times this amount can be thousands of dollars.

The Solution – GAP:

Guaranteed Asset Protection (GAP) waives either a portion or all of the remaining balance owed on the loan or lease after an insurance settlement is paid for the total loss of a vehicle. ARS' GAP Program is designed to protect buyers/lessees from unexpected expenses due to total losses, as well as protecting lenders/lessors from the collections and customer satisfaction problems associated with these charges.

Typically offered as an aftermarket product by dealerships to loan/lease customers or at the point-of-sale, GAP is sometimes available on a 'blanket' basis by the Lessor and included in all leases.

The Benefits:

  • Provides peace-of-mind to customers at the time of a traumatic experience, can potentially eliminate financial hardship
  • Reduces deficiency balance collection activities and write-offs
  • Voluntary Program can generate fee income for associated Lender, Lessor and Dealers
  • Blanket Program differentiates the Lender and Lessor / products from the competition
  • Can be financed with the vehicle loan or lease
  • Easy and efficient claims processes
  • Contributes to customer satisfaction with repeat business
  • ARS exceeds the highest industry standards of security and compliance through SSAE-16 Certification (formerly SAS-70 II)
  • Coverage provided by insurance companies rated ‘A’ (Excellent) or better by the A.M. Best Company




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