Financial and insurance firms, insurance producers and motor vehicle retailers offer, market, sell and administer a myriad of ancillary protection products in the motor vehicle space. Although they're not a substitute for automobile insurance, ancillary vehicle protection products may offer coverage in the event of a natural disaster (such as flood or hail damage), financial problem (such as unemployment or disability), crime (vehicle vandalism or theft), or a motor vehicle accident. The most common ancillary vehicle protection products are:

Guaranteed Asset Protection (GAP) — In the event that a motor vehicle is a total loss due to an accident or theft, GAP generally covers the amount between the vehicle's current value (which is covered by a traditional auto policy) and the outstanding balance on the loan collateralized by the vehicle.
Credit Insurance — Credit insurance products provide assistance with a purchaser's auto loan payments to the purchaser's auto finance lender in certain situations, such as if the purchaser dies or becomes disabled.
Vehicle Service Contracts — Often referred to as "extended warranties," vehicle service contracts cover parts and labor in the event of mechanical breakdown or manufacturer's defects.

The regulation of ancillary vehicle protection products varies widely depending on the state and product in question. Many ancillary vehicle protection products are regulated as "quasi-insurance" products. For example, most states regulate such products through their insurance departments, but the majority of states expressly exclude vehicle service contracts from their insurance code's statutory definition of insurance. Many states even have separate licensing and financial security requirements that apply to vehicle service contract obligors offering products to consumers.

Special Reports /

Evolving trends in the regulation of ancillary vehicle protection products

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