Barkers offer a wide range of insurance cover. Not only do we handle your typical, car and household cover, but we manage an array of commercial insurance products for businesses.
This month we look at Credit Shortfall Insurance cover: What it is, what it covers, and what kind of individuals generally require this cover.
Credit Shortfall or “Top-Up” Cover
Do you owe your bank or vehicle finance company MORE than your vehicle is insured for?
Credit Shortfall cover is a financial “Top-Up'' cover that can be taken out when financing your vehicle through a bank or an approved vehicle finance company. Should the amount you owe your financial institutions EXCEED the insured value of your vehicle, you could find yourself in severe financial trouble should your vehicle be written off or stolen.
Here is an example of how the Credit Shortfall works:
Bob has a Ford Ranger which he purchased through a vehicle finance company and insures it with Barker Insurance. The current retail value of his Ford Ranger is R400 000, however, Bob owes the vehicle finance company R425 000 to pay off his vehicle. If Bob were in an accident and his vehicle was written off, or stolen, Bob’s insurance claim pay-out to the vehicle finance company would be R400 000 (less his excess). But that doesn’t cover everything Bob owes the vehicle finance company. He now still owes them R25 000 out of his own pocket which he may not have. Had Bob taken Credit Shortfall cover, the insurance pay-out would be extended to cover the outstanding finance amount that he owes to the vehicle finance company (Credit Shortfall amount is based on a percentage of the insured vehicle value) and he wouldn’t have to self-fund this amount.
Had Bob only owed the bank R375 000, he would not have required Credit Shortfall cover, as the amount he owed the vehicle finance company was LESS than the current insured value of his vehicle.
This cover can be taken out on new or used vehicles, provided the vehicle is financed. It is not compulsory to take Credit Shortfall or “Top Up” cover with your bank or vehicle finance company but if you change your mind later down the line, it can seamlessly be added to your vehicle cover on your Barker Insurance Policy, at a nominal additional fee.
How does one know if they require Credit Shortfall?
Consult your vehicle financial statement to ascertain how much you still owe the bank or vehicle finance company, then contact your Barker Insurance consultant to check what the current retail value of your vehicle is. You can then determine whether you need this cover. If required, your consultant can assist you with a quote in addition to your current cover and confirm the amount of Credit Shortfall cover it provides to ensure that you are adequately covered.
Should you require further information on this cover or a quote in this regard, please contact your Broker consultant.