GAP Insurance—Techniques and Challenges

GAP (Guaranteed Asset Protection) insurance is an insurance product that insures the difference (if any) between the loan balance and the actual value of the underlying asset. Typically, this insurance is sold in conjunction with a traditional insurance product and guarantees that an insurable event will be sufficient to satisfy any lien upon the asset. While this type of insurance is used to cover a variety of exposures, the largest asset class is private passenger vehicles.