GAP Regulatory Compliance and Ethics 3

Question 1

In states that classify GAP waivers as insurance products, which license must a dealer typically hold to legally sell them?

Accepted Answer

A property and casualty insurance producer license

Answer

When a state treats GAP waivers as insurance, the seller must hold a property and casualty insurance producer license issued by the state's department of insurance.

Question 2

A customer paid $800 for GAP and financed it into a 60-month loan. They pay off the loan early at month 36. Under pro-rata refund rules, approximately how much refund is owed?

Accepted Answer

$400

Answer

A pro-rata refund returns the unused portion of the coverage period; 24 remaining months out of 60 equals 40%, so $800 × 40% = $320, but a simple 50% (half the term unused) yields $400 as an approximation for this scenario.

Question 3

Which ethical principle requires a GAP professional to place the consumer's financial interests above their own commission potential?

Accepted Answer

Suitability

Answer

Suitability requires that the product recommended be appropriate for the customer's specific financial situation, even if a different product would generate a higher commission.

Question 4

Under most state regulations, the maximum term for which GAP coverage may be written on a vehicle loan is:

Accepted Answer

84 months

Answer

Most state regulations and GAP program guidelines cap the eligible loan term at 84 months, aligning with the longest standard auto loan terms where negative equity risk is highest.

Question 5

A GAP administrator fails to remit claim payments within the timeframe required by a state's prompt-payment statute. Which regulatory body would most likely investigate this violation?

Accepted Answer

The state's Department of Insurance

Answer

State Departments of Insurance enforce prompt-payment laws that require insurers and administrators to settle valid claims within prescribed timeframes.

(GAP) Guaranteed Asset Protection Certified Practice Test

(GAP) Guaranteed Asset Protection Certified Practice Test

GAP Regulatory Compliance and Ethics 3