Credit shortfall

The gap arises because a car depreciates faster than the finance balance reduces, especially in the first few years and on deals with a small deposit, a balloon payment, or a long term. If the car is written off or stolen during that period, the comprehensive policy pays its current value — which can be well below what you still owe the bank.

A worked example: you owe R280,000 on a car the insurer values at R230,000 when it is stolen. Comprehensive settles R230,000 to the bank; credit shortfall cover settles the remaining R50,000, so you walk away owing nothing rather than servicing finance on a car you no longer have.

It is most worth holding in the early years of finance and on higher-depreciation models. Some products also cover a portion of your excess or early-settlement penalties — read the wording, because limits, waiting periods and exclusions vary between insurers.