“I have comprehensive car insurance, I dont need anything else” – is every person’s though right now and shortfall cover? what is short fall cover?
Shortfall cover helps close the gap between the money you still owe on your car, and the amount your insurer pays out ‒ which is based on the value of your car at the time of the claim. Shortfall cover ensures that you don’t end up into more financial debit if your financed car is written off or stolen.
Why would my insurer pay less than what i owe to my bank or financial institute?
Depending on your insurer, you will be paid either market value, trade-in value or retail value, this amount could be lower than the amount you still owe to the bank OR in some cases would pay off the bank fully and still have a little change for your pocket!
As soon your car leaves the showroom floor it depreciates in value, Depreciation is the difference between the amount you paid for your car and the amount you get for it should you sell it or trade it in.
So how do you know if you need shortfall cover or not?
If you don’t have a car loan or you either bought your car for cash or you can afford to cover the shortfall, you don’t need shortfall cover. If you do have a car loan, the main thing that will determine whether you need shortfall cover or not, is how quickly you pay off your loan.
here are 8 reasons to know if you do need shortfall cover
- A balloon payment is a large lump sum that needs to be paid at the end of the repayment period.
- No deposit or your deposit was less than 20%, The bigger the upfront deposit you give, the smaller your loan will be.
- You loan is 5 years and over, Having a long repayment term means that your loan amount decreases slowly, increasing the risk that the value of your car will depreciate quicker than your loan
- Leased car, When leasing a car, you are essentially renting a car for a certain time period and for a certain amount of money.
- You bought a brand new car
- Insuring your vehicle for market or trade value
- High interest on your loan
- You are in the first 24 months of you loan
If you’re still unsure, check with your insurer or your finance house — they can help!
At AB Brokers we offer you shortfall cover, so give us call on 0861 696 999 or, WhatsApp our sales team on 072 930 2743 alternatively send us an email & a consultant will call you back abbrokers@abbrokers.co.za