GAP Product Features & Pricing Flashcards

Which vehicle type is generally EXCLUDED from most standard GAP programs?

Answer: Commercial vehicles over a specified GVWR threshold

Commercial vehicles over a certain gross vehicle weight rating (GVWR) are typically excluded because their depreciation and value schedules differ significantly from personal-use vehicles.

When a GAP product is cancelled mid-term, how is the unearned premium typically calculated?

Answer: Pro-rata or Rule of 78s method based on the program terms

Unearned premium refunds on cancelled GAP products are most commonly calculated using a pro-rata or Rule of 78s method as specified in the contract terms.

What is the standard maximum loan term covered under most GAP products offered in the US?

Answer: 84 months

Most US GAP programs cover loan terms up to 84 months, aligning with the extended financing terms now common in auto lending.

Which of the following best describes a 'financed GAP' product?

Answer: A GAP product whose single premium is included in the vehicle loan balance

A financed GAP product is one where the single upfront premium is rolled into the vehicle loan, meaning the borrower pays for it over the life of the loan with interest.

A GAP product's 'maximum benefit cap' most directly limits:

Answer: The total dollar amount the GAP program will pay at loss

The maximum benefit cap sets the ceiling on the GAP payout—for example, a $50,000 cap means the program will not pay more than $50,000 regardless of the actual gap.

For a used vehicle GAP program, the vehicle's value at origination is typically established using:

Answer: An industry guide such as NADA, Black Book, or Kelley Blue Book

Used vehicle GAP programs use recognized industry valuation guides (NADA, Black Book, KBB) to establish the vehicle's value at origination and assess the LTV.