GAP Client Advisory Services 3 — Questions and Answers
Question 1: When advising a leasing client about GAP coverage, what key distinction should an advisor communicate compared to a financed purchase?
- Leased vehicles never qualify for GAP coverage
- Many lease agreements include built-in GAP coverage, but advisors should verify the terms (Correct answer)
- GAP on a lease covers only the residual value, not monthly payments owed
- Leased vehicles always require a separate GAP policy purchased independently
Correct answer: Many lease agreements include built-in GAP coverage, but advisors should verify the terms
Many lease contracts include GAP-like provisions, but the coverage terms vary widely, so advisors must review the specific lease agreement before recommending additional GAP.
Question 2: A client is deciding between a dealer-sold GAP product and a GAP product offered by their credit union. What is a key advisory point?
- Dealer GAP products are always regulated more strictly than credit union products
- Credit union GAP products typically have lower premiums and may offer refunds on unused portions (Correct answer)
- Dealer GAP products always provide broader coverage than third-party alternatives
- Credit union GAP products can only be used at credit union-affiliated dealerships
Correct answer: Credit union GAP products typically have lower premiums and may offer refunds on unused portions
Credit union and lender-sold GAP products often carry lower premiums and pro-rated refund provisions compared to dealer-financed GAP add-ons.
Question 3: Which regulatory requirement is most important for a GAP advisor to communicate to a client at the point of sale?
- GAP coverage is mandatory in all 50 states for financed vehicles
- Clients must be informed of the right to cancel GAP coverage and receive a pro-rated refund (Correct answer)
- GAP coverage automatically renews annually unless the client opts out
- Clients must file a separate state registration for their GAP policy
Correct answer: Clients must be informed of the right to cancel GAP coverage and receive a pro-rated refund
Federal and state consumer protection regulations generally require that clients be informed of their cancellation rights and any applicable refund provisions for GAP coverage.
Question 4: A client asks an advisor what happens to their GAP coverage if they sell their vehicle before the loan is paid off. What is the correct answer?
- GAP coverage transfers automatically to the buyer of the vehicle
- The GAP coverage terminates, and the client may be eligible for a pro-rated refund (Correct answer)
- GAP coverage remains active on the client's next vehicle purchase without any additional cost
- The client must maintain GAP coverage until the original loan is fully paid off
Correct answer: The GAP coverage terminates, and the client may be eligible for a pro-rated refund
GAP coverage is tied to the specific vehicle and loan; when the vehicle is sold and the loan is paid off, the GAP policy terminates and a refund of the unused premium may be available.
Question 5: What is the advisor's responsibility when a client experiences a total loss and needs to file a GAP claim?
- The advisor submits the GAP claim directly to the state insurance commissioner on behalf of the client
- The advisor should guide the client to notify their primary insurer first, then initiate the GAP claim process with required documentation (Correct answer)
- The advisor is legally required to handle all paperwork personally and cannot delegate to the client
- The advisor must wait for the primary insurer to close the claim before the GAP process can begin
Correct answer: The advisor should guide the client to notify their primary insurer first, then initiate the GAP claim process with required documentation
Advisors should counsel clients to promptly notify their primary insurer to establish the ACV settlement, then coordinate with the GAP administrator using that settlement documentation.
Question 6: A client's vehicle was declared a total loss due to theft. Which document is typically NOT required in a GAP claim submission?
- Primary insurance company's settlement letter showing the ACV payout
- A police report documenting the theft
- The vehicle's original window sticker (Monroney label) from the time of purchase (Correct answer)
- The current loan payoff statement from the lender
Correct answer: The vehicle's original window sticker (Monroney label) from the time of purchase
While purchase documentation may sometimes be requested, the Monroney sticker is generally not a standard required document for a GAP theft claim.
Question 7: A client is concerned that their GAP coverage may not pay the full loan balance. Which common GAP limitation should an advisor proactively disclose?
- GAP will not pay if the vehicle has more than 50,000 miles at the time of loss
- GAP typically excludes delinquent payments, late fees, and extended warranties rolled into the loan (Correct answer)
- GAP will only pay if the vehicle was destroyed in a collision, not in a natural disaster
- GAP benefits are capped at 10% of the original purchase price
Correct answer: GAP typically excludes delinquent payments, late fees, and extended warranties rolled into the loan
GAP policies commonly exclude past-due payments, penalties, and add-on product costs that were rolled into the loan balance from the covered payoff amount.
GAP Client Advisory Services 3
When advising a leasing client about GAP coverage, what key distinction should an advisor communicate compared to a financed purchase?