Coverage Terms & Conditions Flashcards
7 cards from real GAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Coverage Terms & Conditions flashcards as text
Under a GAP waiver, what does 'waiver of deficiency' mean?
Answer: The lender agrees to cancel the remaining loan balance after a total loss settlement
A waiver of deficiency means the lender contractually agrees to forgive the balance remaining after the primary insurer's ACV payment, which is the core function of GAP.
Which of the following correctly describes a 'total loss threshold' in the context of GAP?
Answer: The percentage of vehicle damage at which a primary insurer declares total loss
Primary insurers declare a vehicle a total loss when repair costs meet or exceed a certain percentage of ACV, commonly 70–80%, which then triggers GAP eligibility.
What happens to GAP coverage when a vehicle loan is refinanced?
Answer: The original GAP agreement typically terminates and a new one must be purchased
Refinancing creates a new loan agreement, and the original GAP contract is typically terminated; the borrower must purchase new GAP coverage for the refinanced loan.
What is a 'benefit period' in a GAP agreement?
Answer: The time frame during which GAP coverage is active and a claim can be filed
The benefit period is the length of time the GAP agreement is in force, typically matching or shorter than the loan term, during which a total loss can trigger a claim.
If a vehicle is declared a total loss due to flood damage, GAP coverage would apply if:
Answer: Flood damage is listed as a covered peril under the primary auto policy and GAP agreement
GAP follows the primary insurer's total loss settlement; if the primary policy covers flood as a comprehensive peril and pays ACV, GAP covers the remaining shortfall.
A customer cancels their primary auto insurance after purchasing GAP. What is the result?
Answer: The GAP agreement becomes void because GAP requires active primary insurance
GAP coverage is contingent on active primary auto insurance; without a primary insurer's ACV settlement, there is nothing for GAP to supplement.
Under what circumstance would a GAP provider deny a claim due to a 'misrepresentation' exclusion?
Answer: The customer provided false information about the vehicle or loan at the time of purchase
If the customer materially misrepresented the vehicle's condition, use, or loan details during application, the GAP provider can deny the claim under misrepresentation exclusions.