Terms and Definitions
- GAP INSURANCE
- Insurance protection that closes the "gap" between a vehicle's ACV or depreciated value, and the outstanding balance on the loan or lease in case of total collision loss or theft of the vehicle.
- GROUP INSURANCE
- The basic credit insurance policies sold on the lives of credit customers is issued under a group policy, not an individual policy.
- INDIRECT LOAN
- The type of loan done through the dealership that involves three parties: the dealership, the customer and the lender. Under the indirect method, the lender does not see the borrower and has contact only with the dealership's Business manager.
- INSTALLMENT SALES CONTRACT
- A credit obligation that has a consistent monthly loan payment.
- INSURANCE REFUND (Credit Insurance)
- There are three situations where a credit insurance refund takes place: when a customer pays off a loan; when a customer cancels the coverage (refund is made to the lender); and at time of trade-in when a refund may be applied to the down payment.
- JOINT LIFE
- Credit Life insurance coverage on both the primary borrower and his/her spouse, or co-borrower.
- LENDING SOURCES
- The institutions, captive finance companies (e.g. GMAC, Ford Motor Credit, etc...), banks, savings and loans, who purchase the dealership's finance contracts. Also called FINANCE SOURCES.
- LIABILITY COVERAGE
- Coverage that protects the insured's assets and pays off people who bring claims in case of an accident that results in injury. There are two kinds of liability coverage: bodily injury and property damage. (See CAR INSURANCE COVERAGE).
- MECHANICAL BREAKDOWN INSURANCE (MBI)
- Like a Vehicle Service Contract (VSC), MBI provides for the correction of defects and undertaking of repairs related to a vehicle's function and performance. The essential distinction between VSC and MBI is that MBI is regulated by a State's Insurance Department, and as such, coverage rates, etc. must be filed and adhered to in the sale and marketing of the product. (See VEHICLE SERVICE CONTRACT).
- NONCANCELABLE
- Credit life and credit accident and health insurance are guaranteed for the full term of the sales contract and are noncancelable by the insurance company once coverage is in effect.
- NON-CAPTIVE BUYER
- Customer who has stated his/her intentions to finance the vehicle purchase with an outside financial source.
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