Shortfall insurance (also known as gap insurance) is often one of the more overlooked insurance options, but it’s also likely to save you a lot of money if you ever needed to claim. We take a look at what gap and shortfall insurance is and why you should seriously consider it.
What is shortfall (gap) insurance?
An example. You own a cool little car, on which you still owe $12000 on your car finance. Your car is written off in an accident while parked outside your house. Your insurance pays $10 000, the value of the car, leaving you still owing $2000 on a loan on a written-off vehicle. Gap insurance makes up the difference, meaning you save yourself $2000. Depending on the level of Gap cover that you have you may be eligible for additional payments towards stamp duty and transfer, insurance costs and on road costs on your new car.
Are there different levels of cover?
Yes, there are. These depend on the amount of shortfall you want to cover. There is also an inconvenience cover, in case you need to rent a car, for example, or a cash payment for you to do whatever you want. Talk to your Yes Loans broker for more information.
How do you get gap cover?
· Sign a car loan contract with a lender
· Take out a comprehensive insurance policy on your vehicle
· Take out gap cover
Do you need it?
If your car is stolen and not recovered or written off, the shortfall insurance (gap cover) may pay off the outstanding amount of the loan, subject to meeting policy requirements.
How you benefit from gap cover insurance
· Outstanding amounts are paid directly to the lender on your behalf.
· You can use the additional funds to help buy a new car – subject to policy limits and benefits payable.
· Convenient – will make payments directly to any relevant parties.
· No need to go into further debt by paying the shortfall
· Keep a good credit rating
· Allows you to purchase a new vehicle quickly
· The gap insurance premium can be included in your loan repayments, subject to affordability.
Contact your local loan and finance specialists. Whether it’s a new house, boat, car or plane, a new factory or equipment for your business, we’re here to help.