How Does Shortfall Cover work in Car Insurance? Find the Best
Vehicle insurance process might seem extremely difficult to get through, but we are sure we can help you get it easily. Using our experience und understanding on this topic, you’ll get your insurance product without wasting time. To help you understand how car insurance works, we’ll stop on a very specific type of cover; Shortfall cover. The first thing you should know is that it’s also called gap cover so, if you find this other term, you know what’s about. Let’s go deeper on car insurance shortfall cover.
What is Shortfall Car Insurance?
We’ll start by explaining what it is known as Shortfall or gap cover. When financing a car, you get involved on a monetary responsibility as, you will spend few months or years giving that money back. So you are allowed to drive the car while you are still paying for it. The problem occurs when your car suffers a big accident, for example, that leaves it written off. In this situation, you have to keep paying for a car that’s not longer usable. So this is when your vehicle shortfall insurance comes to the rescue because the insurance company will take care of paying that remaining amount you own to the bank. Other cases would be if your car gets hijacked or stolen.
To explain it in simple words, shortfall cover is the car insurance plan aimed to finish paying for your financed vehicle due to total loss of any kind.
How does Shortfall Car Insurance work?
Now that we have explained what shortfall cover is, we can move on to expand on how it works. When you buy your car through a financial institution, you are compelled to get car insurance cover. However, that cover refers to a comprehensive plan as it’s a request made by the bank to protect themselves from possible legal or monetary costs if you cause an accident. Now, apart from that if you buy shortfall car insurance cover, you will be helped with the following topics:
Your insurer will pay for the sum of money you own to the bank but taking into account the retail value of your car.
Your car insurance company will also pay for balloon payments
Bear in mind, if you had to refinance your debt before the event takes places, shortfall cover won’t take it into account. It only covers your initial payment schedule.
Sound system and added car accessories are not usually included in shortfall covers.
All the same, remember each company works differently so, you might find slightly different terms.
Car Insurance: Market Value vs Retail Value of cars
When setting the value of a car, there are various component to refer to. In tis case, we want to expand briefly on retail and market value.
Retail value of a car: in this case, it refers to how much would a person pay to buy a specific car through a dealership, for example.
Market value of a car: it refers to how much a car is worth after having been used for some time. This means, for example, you buy a brand-new car for R100000. After a while, that price depreciates, and your car is worth less than when you bought it. So, it’s the value of a car considering its general condition and functioning.
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King Price - Car Insurance
- Choose the excess that best suits your budget. - Save up to 20% when you cover 2+ cars with us. - Emergency assistance 24/7, for when you need to be rescued. - Shortfall cover: for complete peace of mind when your car is financed.
- Choose the excess that best suits your budget. - Save up to 20% when you cover 2+ cars with us.Quote now
These two aspects are important on shortfall cover because your vehicle insurance company will take the retail value and the sum of money you’ve already paid for your car to calculate how much would they pay you on your shortfall cover claim.
What companies have car insurance with shortfall cover?
Having properly explained all you need to know about shortfall cover, it’s time we delve into real alternatives to get it. In this case, the focus will be put on 2 car insurance companies working in this country.
Santam Car insurance is one of them and. It adds this option for those South Africans thinking about buying a new car through a bank.
King Price is another option for you as, it also aims to help those financing their vehicles.
As these companies work similarly on their shortfall cover, you will be able of deciding which one to chose by paying attention to their car insurance plans (from third party to Comprehensive plans). As you are buying a new car, it’s suggested to choose comprehensive cover because it will pay for any detail your car needs to. A good idea to decide is to inform yourself about their special offers, like rewards, to try to see which has the best vehicle insurance product.
Is it worth to get shortfall cover on car insurance?
Shortfall cover is only necessary if your vehicle is financed. So, to start, if you have paid your car completely, you don’t even have to worry about it. But, if you’re still paying your monthly installments, it won’t be a bad idea to consider having shortfall cover to avoid losing your money if there’s a serious issue with your car. On the contrary, if you think getting comprehensive cover is enough, you might go on with that. All the same, do your best to keep your vehicle safe whenever you can.
Car Insurance: Shortfall Cover
What is Shortfall car insurance?
It’s a type of extra cover you get to have financial back up on a financed vehicle while you are cancelling the installments.
What’s important to know about Shortfall cover?
It’s not mandatory to have it, but it will be of help if your car gets completely damaged before paying for it.
How does it work?
You ask for this cover and the company finishes paying for your car if you claim total lost.
It is clear now that, if you are assisted on car insurance, you can take great advantage when buying your cover. We trust we have given you tools to understand if protecting your financed car with shortfall cover is a must or, you can manage without it.
Questions and answers
Do banks demand the borrower get shortfall cover for the car?
No, it’s just a plan you choose to buy or not. Remember, it will only benefit you, not the bank.
What are the requirements?
As with any vehicle insurance package, you must have your driving license.
Are early settlements included in shortfall cover?
It depends on the company. King Price, for instance, does not cover them.