Credit Shortfall Extension is also known as Gap Insurance or Top-Up Insurance. It is called an extension as you can add this type of cover onto your existing policy. It is best explained by way of an example:

You have bought your car on credit and therefore you took out comprehensive insurance as this is required by the bank which granted you the car loan. A few months later your car is stolen and you report this to your insurance company. In those few months your car has depreciated by, at the very least 15%, and the Insurance Company pay out at either the retail or market value of the car. In many cases this will be less than the outstanding loan on the car.

The insurance company also deducts the excess that you have to pay before they pay the balance to the bank which financed your car. You now find yourself in a situation where you have no car and after the insurance payout you still owe the bank a considerable amount. Credit Shortfall insurance will fill this gap and pay out the difference between the insurance payment and the outstanding loan amount. Remember that you are still responsible for the excess.