If you’re one of South Africa’s 1.9 million car owners who’ve financed their cars, here’s a sound piece of advice: Add shortfall cover to your car insurance.
Why, you might ask? Well, between July and September 2024, 8,597 cars were stolen and a further 5,477 were hi-jacked across the country. In addition, South Africa’s roads are considered among the most dangerous in the world, with high accident rates. These stats show that the chance of you losing your car to theft, hi-jacking or write-off (a total loss) is higher than you might think… And, there’s more. Wynand van Vuuren, client experience partner at King Price Insurance, says that not everyone realises they’re still responsible for paying back every cent they borrowed from the financing house, even if their car has been declared a total loss.
“Because the interest on the amount you’ve financed likely makes the total cost of your loan more than the car’s purchase price, and taking into account that your car loses value every month, you may well end up owing more to the financer than what your car is worth at the time of the loss. This is where shortfall cover can save the day.”
Essentially, you can add shortfall cover to your comprehensive car insurance and it will pay the financer what you still owe them, in the event of a valid claim for the total loss of your car.
Van Vuuren notes that, as with all sound financial planning, saving for unexpected expenses is as important as insuring all your risks. “A shortfall cover payout will probably include balloon payments and residual values, but will likely not cover things like the excess amount attached to your claim, payment and interest arrears on the loan, and additional amounts due to loan re-financing or early settlement. It’s always best to ask your insurer or read your policy documents to make 100% sure of what you may still be liable for.”
The lesson? If your car is financed, check its current insured value. If this amount is lower than what you still owe, contact your insurer and add shortfall cover today.
And, if you’re considering financing a car anytime soon, the most logical time to ensure your shortfall is covered is when you’re arranging the comprehensive insurance you’ll need before you can drive your new wheels off the dealership floor.
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Author: Nhlalenhle Dlangalala from ByDesign Communications on behalf of King Price Insurance.
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