CA AB125

Renames "guaranteed automobile protection" insurance to "guaranteed asset protection" (GAP) insurance and expands its definition to include coverage for the difference between insurance proceeds and amounts owed on a vehicle after unrecovered theft or total loss.

Permits GAP insurance to include up to $5,000 in additional payment to an insured to purchase or lease another vehicle, beyond indemnifying the amount owed.

Exempts certain debt cancellation agreements from requiring an insurance license, including waivers in conditional sales contracts by motor vehicle dealers and waivers by lenders that cover amounts owed after insurance proceeds and deductibles.

Prohibits covered waivers from resulting in a credit balance favoring the purchaser or lessee, while allowing dealers and lenders to offer discounts or credits on replacement vehicle purchases or leases.

Takes effect immediately as an urgency statute to clarify the legality of contracts currently being marketed.