If your car is still under finance, comprehensive insurance alone may not be enough when depreciation, balloon payments and outstanding loans collide. Imagine your car being written off or stolen, only to discover the insurer’s payout falls short of what you owe. Gap cover may bridge the shortfall so you never pay for a car you no longer have.
What Is Gap Cover for Cars?
Gap cover, can also be called credit shortfall cover, and protects you when your car’s insurance payout – based on its current market, trade-in, or retail value – is lower than your outstanding finance balance.
Because depreciation often outpaces loan reduction, especially in the first year, this cover can provide additional financial security in the event of a total loss.
Understanding How Your Car’s Value Is Determined
Insurers typically calculate payouts using one of three values. Retail value reflects the dealership selling price and offers the highest protection. Market value represents average prices for similar models.
Trade-in value is what a dealer would offer when you swap cars and is usually the lowest. Knowing which basis your policy uses helps you anticipate any shortfall.
Who Benefits Most from Gap Cover?
Owners of brand-new or nearly new cars face the steepest depreciation curve. Finance deals with low or no deposit often leave you owing more than the car is worth in early months. Extended loan terms increase interest costs upfront, widening the gap.
High-mileage or fast-depreciating models also risk a larger shortfall when compared with lower-value payout bases.
What Gap Cover Typically Includes
Gap cover usually pays a sum of the difference between your insurer’s payout and your outstanding loan balance and may settle early-termination fees or additional interest charges. Some policies offer extras such as car replacement benefits or excess protection.
Always verify policy limits, percentage coverage, and any exclusions before you buy.
Do You Still Need Gap Cover If You Have Car Insurance?
Comprehensive insurance only pays the determined value of your car at the time of loss. It does not cover the remaining loan balance. If your insurer pays R200 000 and you owe R250 000, the R50 000 shortfall is your responsibility without gap cover.
Is Gap Cover Worth It in South Africa?
With high rates of car theft and accident-related write-offs, gap cover is a cost-effective addition to your comprehensive policy. It can save you thousands of rands if the unexpected occurs, especially when you owe more than the car’s insured value.
Not Insured Yet?
Comprehensive car insurance forms the foundation of financial protection for your car. Gap cover is an optional add-on that ensures you won’t pay out of pocket for a total loss. Get an online quote or explore your cover options today.
Disclaimer
This article offers general information about gap cover for financed cars in South Africa. It does not substitute policy terms and conditions.
Always review full T&Cs and consult a certified financial advisor before making decisions.
Get a quote for affordable comprehensive cover with fixed premiums*, reducing excess*, and top-tier service. T&Cs apply.
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