Guaranteed Asset Protection (GAP) is an important vehicle protection product because most primary auto insurers only cover the Actual Cash Value (ACV) of a vehicle—not the outstanding loan balance. This means, if a member’s car is declared a total loss because of an accident or theft, their insurance settlement may not be enough to cover the amount they still owe their financial institution, potentially leaving thousands of dollars for them to pay out-of-pocket for a vehicle they can no longer drive.
GAP protects your borrowers against this significant expense, and gives them peace of mind knowing they’re protected even if an unexpected accident or theft occurs.
GAP is not only beneficial for your members, but for your financial institution as well. To show you how, we have compiled a list of the top reasons why you should be offering GAP.
- GAP protects your borrowers. In today’s economy, many consumers are experiencing financial hardships. In these circumstances, the last thing anyone wants to think about is having to deplete their savings or make other arrangements to pay off their loan. By offering GAP, you’re helping your members protect their investment and potentially obtain a replacement vehicle—without the stress of having to carry over negative equity from the prior loan.
- GAP increases fee income for your institution. GAP can generate significant ancillary income for your institution because it’s affordable protection and is simple to present and deliver.
- GAP is an easy cross-sell. If someone is financing their vehicle with your institution, you have already gained their trust, so take the opportunity to present GAP and its benefits. This will strengthen your relationship with the borrower and strengthen the quality of your loan portfolio.
- GAP reduces loan losses. If your borrower does not have GAP and can’t afford to pay off the deficiency balance that’s left after they receive their insurance settlement, your institution could suffer the loan loss. GAP extinguishes most or all of the deficiency balance, protecting your institution from this potential loss.
Like any other large purchase, it’s important to make sure the investment made in a vehicle is fully protected. GAP is a valuable protection product that is basically a win-win, as it provides peace of mind and financial stability for both you and your borrowers!
Source: Credit Union Insight
Martinez, Ronni. "The 4 Reasons Your Institution Should Offer Guaranteed Asset Protection « CU Insight." CU Insight. Credit Union Insight, 25 Oct. 2013. Web. 05 Nov. 2014.
At USC Credit Union, our goal is to provide you with affordable coverage for unforeseen expenses. If the unexpected happens, whether your car is a total loss due to accident or theft, your vehicle suffers a major mechanical failure, or you're hit with bills you can't pay, count on us to protect you.
GAP Insurance will protect you from a large unexpected financial loss if your vehicle is stolen or totaled. The settlement your auto insurance company would provide may be substantially less than the amount you owe on your loan. Did you know you are liable for the difference?