How Top Up Insurance Can Help You

Few people know that Top Up insurance should be part of the equation when you purchase a new vehicle on credit.

Car insurance is readily available in South Africa. Every car owner is usually indebted to the bank or a financial institution for the amount of the car. For this reason insurance will be a part of the whole purchasing deal.

The time may come for an insurance pay-out on a car that you might have written off soon after signing the financial agreement with the bank.

The question arises as to the difference between what the insurance will pay you out and what you still owe on the car. You may not like knowing that as the owner, you are liable for this difference. That’s where top up insurance comes in.

Make up the Difference with Top Up Insurance

Top up insuranceWith so many South Africans facing crippling debt, many people find it impossible to pay back such a shortfall after they have received their insurance pay-out.

But fortunately there is hope in this type of situation. Known as a top-up policy, top up insurance can be a life saver. (It is also called credit shortfall insurance.)

We all know that cars depreciate the minute they leave the showroom floor. This means that as a car owner, you will already be incurring potential shortfalls straight away. It won’t be the insurer who will be paying the shortfall; it will be you, the owner. But with the top up insurance plan, you have cover for the shortfall.

As a New Car buyer you Should be Fully Aware of the Cost Implications

Top up insurance is actually for people who have bought new cars through financial agreements. Should the cost of selling your vehicle finance exceed your insurance pay-out, that’s where the top-up will help you with that extra amount owing.

If you are able to put down a big deposit on the purchase of your new car, you possibly won’t need the top up insurance. Top up insurance saves you out of pocket exorbitant cash payments.

Nothing is binding, you can discontinue it whenever you feel the need, however it does provide a tremendous sense of peace. Top up insurance is essentially for those people who do have an existing car insurance policy in place. This could be third party or comprehensive insurance.

How Does Top up Insurance Work

A good example of how top-up insurance works is if you buy a car through your bank. You sign an agreement for the car which is priced at R320 000. This is the amount you owe the bank. You would have been obliged to have comprehensive insurance for your car. The short term insurance is valued at the market value of the car.

Where is the R30,000 going to Come From?

If the car was written off a year later and the car at market value depreciated at 25% in the first year, it would be valued at R240 000. With the interest rate included, the amount you owe is actually about R270 000. That means there is a balance of R30 000 which you need to owe.

This is where top-up insurance comes in. The R30 000 would then be covered and you wouldn’t have sleepless nights wondering where you were going to find this R30,000. Top up insurance is really worth your consideration.

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All info was correct at time of publishing October 8, 2018