Shortfall Insurance

Shortfall Insurance is designed for where your comprehensively insured vehicle is written off (declared a total loss) as a result of accident or theft, and you find that the payout from your comprehensive insurer when your claim is accepted is less than what you owe your credit provider for your vehicle.

If your vehicle is declared a total loss by your comprehensive insurer, Shortfall Insurance is a policy that will help you avoid having to pay any shortfall between what your comprehensive insurer pays out and what you still owe your credit provider for your vehicle.

Depending on the level of cover selected, this policy may also pay a range of expenses associated with the replacement of your vehicle.

Let’s take a look at the following scenario:

Your car has been written off, either stolen or damaged beyond repair. Your comprehensive insurer pays the market or agreed value which is 15K, but your finance company requires $20,500 to finalise the loan, so another $5,500 is needed to pay out your loan contract. Have we all got that type of spare cash in the bank to use for those unexpected emergency. Not really, but even if you did, you don’t want to spend it on a car you no longer have! So what can you do to prevent yourself from being in this difficult situation?

Solution

Shortfall Insurance Cover, also known as Gap or Equity Plus, pays the amount outstanding (up to the sum insured) to your finance company which could save you from a huge financial burden. Cover can vary, with options for 'the gap' for example of up to $20,000.

The additional associated costs for the replacement vehicle, such as registration, stamp duty & insurance costs etc, may also be met as an additional benefit with Shortfall Insurance, and the amount of the ‘Extra Cover’ is dependent on the level of cover selected.

Generally, your maximum exposure to 'the gap' will occur from the day you take delivery to perhaps the end of the third or fourth year of the loan, but can continue to the end of a contract, depending on the type of finance contract and upon the term of your loan.

So you can clearly see there is a huge benefit in obtaining Shortfall Insurance when you are financing your next car purchase. You simply pay once only premium and you are covered for term noted on the application or up to the duration of your loan. This could cost as little as $3 a week* and could save you thousands. But remember, as Shortfall Insurance covers the difference between your Insurance payment and what is required to payout your finance contract, you must keep your vehicle insured comprehensively insured.

The information in this segment is of a general nature only, and does not take into account any financial objectives, situations and needs. Before you purchase a Shortfall Insurance policy please read the appropriate Policy Disclosure Statement.