What is Credit Shortfall Insurance?
Credit shortfall insurance is sometimes also called top-up or gap insurance. It exists to cover the difference between your vehicle’s retail value (usually the amount the car is insured for) and how much you paid for it when you bought it - i.e. the amount you owe on your loan.
Here is a practical example of where credit shortfall cover would be a lifesaver. Say you bought your vehicle for R150 000 and you've paid R20 000 off on your financing loan. It gets written off in an accident and your insurer only pays out R100 000 (its current retail value}. You still owe R130 000 on the vehicle so that means a shortfall of R30 000.
If you had taken out gap cover, that R30 000 shortfall would be paid out to the financial institution to settle your outstanding amount so you're not left out of pocket.