Vehicle Shortfall Insurance in South Africa

    June 21, 2018

    Here we will talk about vehicle shortfall insurance in South Africa and everything you might need to know.

    • Credit shortfall insurance is vital for vehicles bought on finance
    • You are covered for outstanding finance debt
    • This cover is advised for new and used cars under finance
    • Credit shortfall insurance is also known as Gap Cover
    • Only use an authorised service provider

     

    What is vehicle shortfall insurance in South Africa?

    What very few owners of financed new or late-model used vehicles don’t realise is that they are leaving themselves wide open to a financial nightmare should their vehicles be stolen or written off in an accident.

    They lose thousands of Rand on the purchase price of their vehicle the moment they drive it off the showroom floor. Add to that the interest rates applied to finance. And the amount owed to the financial provider escalates well above the actual market value of the vehicle.

    The solution to cushioning this difference is credit shortfall insurance, also known as gap cover or top-up insurance.

    Here is an example of what could happen – Vehicle Shortfall Insurance in South Africa

    Vehicle Shortfall Insurance In South Africa

    1. You buy a vehicle for R200,000 that gets it’s finance from Wesbank.
    2. A few months later the vehicle is stolen (or written-off in an accident).
    3. At that time, the retail (replacement) value of the vehicle is R150,000.
    4. Between the purchase date and the date of the incident, you have made payments to Wesbank amounting to R20,000.
    5. The shortfall is R30,000 – the initial financing amount less the retail value less your monthly repayments.

    The nightmare begins

    Now, not only do you find yourself without transport but, to add insult to injury, you also have to find R30,000 to repay your finance house!

    The solution

    Credit shortfall insurance is the solution. If you had opted for that additional option when insuring your vehicle, you would now be free and clear of any outstanding finance charges.

    Your insurance options – Vehicle shortfall insurance in South Africa

    There are three different types of vehicle insurance options that are more often than not never fully explained when purchasing a vehicle. These options are insurance cover for:

    1. Retail value – this is the most expensive option and covers your vehicle for the price at which it would be currently on offer at in dealerships
    2. Trade value – the value of the vehicle based on current trade-in prices
    3. Market value – this is based on the average between retail and trade values and is also dependent on the condition of the vehicle and the mileage you have clocked

    Now, assess the amount of any possible credit shortfall that could occur should something happen to your vehicle and add gap cover as an additional option. Paying that little extra on your insurance policy every month could save you a ton of money at the end of the day.

    What credit insurance shortfall does not include

    • Unspecified sound equipment and accessories
    • Excess amounts payable when claiming
    • Any arrear instalments and outstanding interest payments these have accrued
    • Any additional finance charges
    • Also, any early settlement penalties

     

    Useful information on vehicle shortfall insurance in South Africa

    Remember, if nothing untoward happens to your vehicle while it is under finance. The time will arrive when its value is higher than the outstanding amount owed to your finance house.

    At this point, cancel your gap cover policy immediately.

    So always insure your vehicle with an authorised financial service provider like Miway who will provide you with a free no-obligation quote.

    Ask one of their consultants to explain any clauses you may feel unsure about.

     

    To get a Car Insurance quote, complete the form on this page and click on the “Get a Quote” button.

    All info was correct at time of publishing