Shortfall insurance (gap cover)
When your vehicle is declared a total loss as a result of accident or theft – shortfall insurance steps in to an important breach. It covers the gap between the comprehensive insurance payout for your written off vehicle and the amount you owe your credit provider for that vehicle.
In this audio track Mary explains how shortfall insurance can save you thousands.
Shortfall insurance can only be taken out at the start of the loan contract. So it is crucial that you include such cover when you sign up for your vehicle loan. That way you can rest assured that you won’t be liable for any shortfall between your comprehensive insurance pay-out and the amount owing on your vehicle at the time of accident.
Depending on the level of cover selected, this policy may also pay a range of expenses associated with the replacement of your vehicle.
Shortfall insurance in action
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. That means you need to come up with another $5,500 to pay out your loan contract. Now not all of us have that type of spare cash in the bank to use for those unexpected emergencies. And even if you did, you wouldn’t want to spend it on a car you no longer have. So what can you do to avoid being in this difficult situation? The answer is shortfall insurance.
Your shortfall insurance solution
Shortfall insurance cover is also known as gap or equity plus. Such protection could save you from a huge financial burden. Cover can vary, with options for ‘the gap’ of up to $20,000.
Shortfall insurance may also over additional associated costs of replacing your vehicle. Such cover may extend to include registration, stamp duty, insurance costs and more. The amount of extra cover you enjoy depends upon the level of cover you select in your policy.
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. However this can continue to the end of a contract, depending on the finance term and contract type.
Size up your shortfall insurance options
So you can clearly see there is a huge benefit in obtaining shortfall insurance at your next car purchase. You simply pay a 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 shortfall insurance covers the difference between your insurance payment and what is required to payout your finance contract. So you must keep your vehicle comprehensively insured.
Natloans aims to support you in making fully informed insurance selections. But the information provided here and in the multimedia segment above is of a general nature only. Shortfall insurance can and must be tailored to your individual financial objectives, situation and needs. So before you purchase a shortfall insurance policy please read the appropriate Policy Disclosure Statement. Or speak to Natloans about a truly customised shortfall insurance solution.
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