GAP Cheat Sheet 2026

The 30 highest-yield GAP facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. When might a claim be denied? → If policy terms are violated or coverage doesn’t apply.
2. What is a limitation of GAP insurance? → It doesn’t cover the deductible from your primary auto insurance.
3. A GAP administrator's combined ratio is 108%. What does this indicate about program profitability? → The program is incurring an 8% underwriting loss
4. What does 'coverage period' mean? → The time when coverage applies under a policy.
5. For regulatory financial filing purposes, GAP products are typically reported under which statutory accounting line? → Accident and health — credit insurance or miscellaneous
6. A GAP book of business reports a 'written-to-earned' premium lag. What causes this lag? → The time between policy inception and ratable premium recognition over the coverage period
7. Which of the following best describes a 'ceded loss ratio' in GAP reinsurance reporting? → Losses transferred to reinsurers divided by ceded premiums
8. Which IRC section governs the exclusion of cancellation of debt income when a borrower is insolvent at the time of debt forgiveness? → IRC §108
9. When is GAP insurance most beneficial? → When leasing or financing a new car with little or no down payment.
10. A GAP administrator's monthly financial report shows a 'deficiency reserve.' What does this reserve represent? → The shortfall between reported reserves and actuarially indicated reserves
11. A GAP policy is written on a vehicle with a $40,000 ACV and a $46,000 loan balance. The LTV is approximately: → 115%
12. Which distribution channel is most common for GAP products sold in the US automotive market? → Franchised and independent auto dealerships
13. Which regulatory body most commonly oversees the licensing and sale of GAP insurance products at the state level in the US? → State Department of Insurance
14. What is a near-miss report in GAP practice? → Documentation of an event that could have caused harm but did not
15. Under the FTC's Used Car Rule, which disclosure must be prominently posted on a used vehicle before sale? → The Buyers Guide disclosing warranty status
16. Which client situation represents the LEAST need for GAP coverage? → A client who made a 40% down payment on a 24-month loan
17. How long does it typically take to process a standard auto claim? → In a few days to a few weeks.
18. If a GAP waiver is offered by a lender rather than a third-party insurer, it is regulated primarily as: → A debt cancellation product under banking regulations
19. A GAP underwriter reviewing a commercial vehicle application would consider which ADDITIONAL risk factor not typically present in personal auto GAP? → Higher annual mileage and accelerated depreciation from commercial use
20. What is the primary goal of regulatory compliance in GAP practice? → Ensuring adherence to laws and standards governing professional practice
21. Why is documentation critical in GAP compliance? → It provides evidence of compliance and defensible records
22. Which of the following best describes the concept of 'negative equity' as an advisor would explain it to a client considering GAP coverage? → The loan balance exceeds the current market value of the vehicle
23. What does ROI measure in GAP financial analysis? → Gain or loss relative to the investment amount
24. A dealer in a state that requires GAP waivers to be filed with the banking regulator sells an unfiled waiver form. What is the primary legal risk? → The waiver may be unenforceable and the dealer may face regulatory penalties
25. Which document is essential for processing a GAP claim to verify the outstanding loan or lease payoff amount? → A lender-issued payoff statement dated at or near the loss date
26. If a vehicle is stolen and not recovered, which law enforcement document is required as part of the GAP claim submission? → A police report or stolen vehicle report filed at the time of theft
27. When building a GAP reserve model, IBNR (Incurred But Not Reported) reserves are necessary primarily because: → Total loss events may occur before the claim is formally filed with the administrator
28. Under a GAP agreement, what is the correct treatment of a primary insurer's salvage value recovery? → Salvage value is credited to the lender before calculating the remaining deficiency
29. What is cash flow management in GAP practice? → Optimizing the timing of money coming in and going out
30. What document must the claimant provide to show the exact loan payoff amount owed to the lender at the time of the total loss? → A 10-day payoff quote from the lender dated near the loss date