EXTENDED COVER / GAPP / TOP UP OR COVERPLUS – WHY YOU NEED IT
- Sep 19, 2014
- Our Blog
- Posted by Andrea Prelorenzo
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EXTENDED COVER/GAPP/TOP UP OR COVERPLUS – WHY DO I NEED TO HAVE THIS COVER ON TOP OF MOTOR COMPREHENSIVE INSURANCE?
If you finance your vehicle, it is of utmost importance that you consider this cover, especially if you select a Balloon Payment (Residual Value) at the end of the finance contract. When your vehicle is written off or stolen, your underlying comprehensive insurance will not cover the outstanding debt on your finance agreement. You might end up paying for a vehicle you can’t even drive.
Unfortunately, your vehicle depreciates in value on a monthly basis, which is not in your control and could see a loss of as much as 30% of its value in the first 12 months, while the outstanding amount that you owe the finance company (bank) reduces at a slower rate. Thus the reason you will be liable for the shortfall between your current insured value at the time of loss, and the outstanding bank settlement amount. It often varies, but you are most likely to only break even with your bank settlement versus your insured value only after roughly 30 months.
The Extended Cover protects you against a financial loss, which occurs between the comprehensive insurance policy payout that is often less than the loan amount owed on your vehicle finance agreement.
In addition to the above, you are also covered in the event of your underlying insurance company repudiating your claim due to unintentional violation of the policy conditions. You might still be liable for certain conditions as per your underlying policy such as excesses, storage and towing costs.
Remember that once you claim you are responsible for any basic, including additional excesses prior to your account being settled. In most instances the extended cover will assist you with up to R6000.00 towards the payment of any excess, provided that you have a shortfall balance.
Note: the above policy does not replace the existing motor comprehensive insurance policy. It is a stand-alone value added policy that provides cover in conjunction with your underlying motor comprehensive policy. A friendly reminder to view your insurance schedule, to ensure that you are knowledgeable on your excess conditions, and financially able to pay that should you suffers a loss.