Have you recently purchased or are considering purchasing a car?
Who doesn’t love the smell of a brand-new car as you drive it out of the showroom? The financing of the car, however, can be a complex exercise, with the car dealerships offering many different types of financing structures.
You may have taken out short term insurance on your car so that you would get a full pay-out if your car got stolen or written off in an accident. But is it sufficient to just have comprehensive car insurance if you have financed your new car? The answer is unfortunately ‘No’, and here’s why.
What is Shortfall Protection?
It’s simple really – If your car is financed with a bank or a finance company, you will owe them the cost of the car itself, plus interest, over a fixed period of time. If your car is stolen or written off while you are paying off your car, your comprehensive car insurance will only cover the retail value of your car and not the interest owed to the finance company or bank. This is the gap where Shortfall Protection kicks in and pays off that outstanding amount.
Why do you need it?
If you buy a car for R200 000, fully financed, and it is stolen within 10 months, your insurance will cover you for the replacement value of the car. The car would have devalued up to 20% in the first year. Say, insurance pays R160 000. The problem is that you still owe the financier R190 000 for the car. The R30 000 difference plus the excess on the policy will have to be paid out of your own pocket.
This is why Shortfall Protection is essential when purchasing a car, to ensure you are never out of pocket should the unexpected happen. Shortfall Protection is particularly important to have if you have a balloon payment structure (residual payment loan) in place with your bank or finance company.
A balloon payment, if you don’t know, is when loan payments are made for a certain amount of time, ending with you paying a lump sum to your lender/bank at the end of the loan term. If you have a balloon payment structure with your bank, then Shortfall Protection could save you having to pay that lump sum if your car gets stolen or written off before the lump sum amount is due.
So when financing a car, you need to take into consideration all these additional expenses that come into play and could leave you out of pocket, but if you have Shortfall Protection Cover in place, then those bills will be covered.
Why choose Bidvest Insurance for Shortfall Protection?
- Shortfall Protection – Covers the difference between your comprehensive insurance pay-out & what you still owe the bank if your car is stolen or written off.
- Excess Protection – Up to R10 000 cover towards your underlying insurance excess.
- Additional Accessories – Up to R10 000 cover towards any accessories fitted on the car that have not been specified on your underlying insurance policy
- Loyalty Bonus – R10 000 towards a replacement car when purchased from a Bidvest Insurance approved dealership.
- Unintentional Violation Cover – Should your underlying insurer not pay for your stolen or written off car due to an unintentional violation Bidvest will provide cover
- Instalment Protection – Should your claim for a stolen or written off car with your underlying insurer take more than 60 days, Bidvest will then pay your monthly car instalment up to R5 000 for up to 3 months.
How much does it cost?
If you’ve owned your car for under 3 years then you are at risk of having a shortfall!
Every car is different so Bidvest Insurance will quote you on your specific car.
If you’re interested in receiving a quote from Bidvest Insurance, simply submit your details below.
Bidvest Insurance Ltd is an authorised Financial Services Provider. FSP number 46395. Ts & Cs Apply
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