So What Is The Difference Between Shortfall Insurance And Car Insurance
Owning a car gives you freedom. You can come and go as you please – but what if it’s stolen? That’s where shortfall insurance comes in.
Most people in South Africa aren’t able to pay cash for a new or second-hand car, so getting motor finance is the only way many people can own a car.
If you want to have an idea of what your monthly repayments will be for your vehicle loan, a car finance calculator on the particular car finance website is useful.
Shortfall Insurance is Essential in Case Your Car is Stolen or Written off
A vehicle finance loan requires quite a bit of paperwork. By the time you’ve compared car insurance quotes and taken out insurance for your car, it will have set you back quite a bit.
Vehicle insurance will cover you and your car against a range of risks. It is shortfall insurance however that is so necessary if your car is stolen or written off.
If your car, motorcycle, minibus, caravan, light delivery vehicle, panel van or trailer is damaged beyond repair, what happens to the amount you still owe on them?
Imagine the nightmare of having to buy a new car while still paying off the loan for a car which has been written off. Shortfall insurance eliminates this possibility.
So What is Shortfall Insurance Exactly?
Shortfall Insurance covers the amount still outstanding on your car. This kind of insurance is available from top car insurance brands such as Virgin Insurance, Regent and Discovery.
It covers you for shortfalls on your comprehensive car insurance. If your car is stolen or written off, the risk of having to carry on paying for a car you no longer have is removed.
This must-have insurance simply covers you for the difference between the insured book value of your car and the outstanding loan amount. Shortfall insurance on a car covers all financial losses which are covered by comprehensive insurance including your deposit, credit shortfall, installment protector and excess.
Who Needs Shortfall Cover?
Shortfall insurance is important for anyone who has recently bought a new car on hire purchase. If you were to suffer a major loss such as theft or accident, the shortfall could cripple you financially. Most South Africans buy a car and insure it, without understanding the limitations on them.
Shortfall insurance pays the difference between what your vehicle is insured for, and the amount you still owe to the bank. When your car is stolen or written off, a shortfall arises when the outstanding loan amount is higher than the value of your car.
Bear in mind that your car depreciates with time and comprehensive insurance only pays out the depreciated value of the vehicle at the time of loss or accident. The shortfall insurance protects every car owner from having to pay a shortfall.
Which Companies offer Shortfall Cover?
Insurance companies such as Regent Insurance and Discovery offer shortfall cover as well as banks such as Standard Bank. Their Vehicle and Asset Finance is linked to leading South African insurers who provide the most cost competitive premiums and cover.
McCarthy shortfall insurance provides additional cover in situations which are not covered by comprehensive insurance. Apart from covering the difference between your insurance payout and what you owe the bank, you can benefit from their Deposit Protector option, which covers your deposit up to R50 000.
You Need additional Financial Back-Up
It can be sickening to have your car written off in an accident. All those hidden costs can deplete every financial resource you have. Shortfall insurance gives you additional financial back-up.
If your vehicle is stolen, instead of you having to continue repaying the loan you took out for your car, you are freed from your financial obligations with shortfall cover.
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