Are you interested to learn about the Absa shortfall insurance in South Africa? Check out this guide!
Shortfall insurance, also known as gap insurance or top-up insurance, covers the difference between your vehicle’s retail value and the amount you paid for when you bought it.
It is basically the difference between the amount the car is insured for and the amount of your car loan.
We will first show you why you need this cover.
Why You Need A Credit Shortfall Insurance
If you buy a new car or recent model used car on hire purchase from a motor dealer, you are recommended to take this insurance.
If you are financing your car, you do not want to keep paying off a car you do not own anymore.
If you are buying a brand-new car, you should know that the value of this car will depreciate 15-20% in the first year and about 50% after you own it for five years.
With this cover, you are guaranteed to face a value gap if your car is deemed beyond economical repair following an accident or if the car is stolen.
The cover is good for you if you want to save money for other expenses. It is not to keep worrying about having to make up the shortfall yourself if your car is stolen or written off.
These are some of the reasons you need an Absa shortfall insurance in South Africa.
Absa Shortfall Insurance
This cover is most necessary for the first two years of paying your vehicle finance loan.
Your vehicle needs to have comprehensive car insurance. Therefore, you will not access this cover if you only insure your car partly, for example, for third party, fire, and theft.
If your car is insured for less than its market value, the shortfall applies to the market value and not the insured amount.
You are compensated if the insurer accepts a claim for the vehicle being either beyond economical repair following loss or damage.
You will also be compensated for a vehicle stolen and not recovered within a reasonable period.
This is how the Absa shortfall insurance works in South Africa.
What Is Not Covered By This Absa Policy
The insurance does not cover extra expenses related to your car finance or loss.
Below are some expenses not covered by the shortfall insurance:
- Additional finance charges
- Unspecified sound equipment or accessories
- Early settlement penalties
This is all you need to know about Absa shortfall insurance in South Africa.
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