A complete guide to car insurance in New Zealand

If you’re getting a new car or your current car insurance is coming up for renewal, it pays to shop around and compare policy details carefully. This helps to ensure you’re getting what you need for the best price. You should certainly look into insurance before buying any car, to make sure you can afford the premiums. It’s also important to get good independent advice from family, friends or a specialist, such as a financial adviser or insurance broker. There’s a lot to consider and understand though, so this guide is designed to help you get started on the main points.

What is comprehensive car insurance?

Comprehensive car insurance provides financial protection for legal liability if your car is damaged in a car accident or is stolen. It also provides cover for accidental damage your car causes to other people’s vehicles or property. A comprehensive car insurance policy usually includes other benefits, such as reimbursement for the cost of towing your car to a nearby repairer and getting you safely home. There are also optional benefits, such as cover for a rental car while yours is being repaired. Comprehensive insurance keeps you and your vehicle protected.

What is third party, fire and theft car insurance?

Third party fire and theft cover only covers your car for damage or loss if it catches fire or is stolen. It might also include limited cover for possessions in your car at the time. So your car is not covered if it’s damaged in an accident. But it will pay out for accidental damage to other people’s vehicles or property caused by your car.

What is third party only car insurance?

This cover only pays other people for accidental damage to their vehicles or property caused by your car. No matter what happens to your car, it won’t pay you anything, even if it’s stolen or vandalised. One exception some policies include is cover for damage to your car during an accident caused by an uninsured driver, provided you get their contact details and registration.

What is the best type of car insurance?

Everyone’s situation is different. The best type of car insurance cover usually depends on how much your car would cost to replace, how much the insurance premiums are and what you can afford. It also comes down to how essential it is for you to have a car and your appetite for risk. As you’d expect, comprehensive cover costs more and third party-only is the cheapest.

If you can afford the premiums, most insurance experts would recommend you get comprehensive cover. If your car is not worth very much, you might think it’s not worth insuring. However, the cost of comprehensive cover depends on your car’s value, among other things, so you might find it’s still worth getting, if only for the peace of mind.

What’s the bare minimum?

If your car was stolen and never recovered, could you afford to buy another one? Would you need a replacement car immediately or could you wait until you have saved up for a new one?

You might get away with third party only if:

  • you’re an experienced and careful driver
  • live in an area with little traffic and nice straight roads
  • have a car worth something like $5,000 or less
  • have emergency savings that could be used to replace it

If cars often get stolen in your area, then paying more for third party fire and theft might make sense.

What affects the cost of your car insurance?

The cost of car insurance is based on the risk to the insurer. The more risk, the more they will charge. When you get a quote for car insurance you’ll be asked about:

  • The car’s make, model and year
  • Whether the car has any modifications
  • Where you live
  • Whether the car is usually parked on the street, off-street or in a garage
  • Whether the car has an immobiliser or alarm
  • Your age, gender and accident record
  • Whether any drivers will be under 25 years of age
  • Whether the car is used for business purposes

So a compact Japanese car located somewhere like Invercargill by a 40-something female who has never had an accident will cost much less to insure than a modified high-powered street racer driven by a young Auckland male.

What’s the difference between agreed value and market value?

Agreed value policies provide a maximum pay-out that you and the insurer agree on when you take out and renew your policy. Your premium is based on this amount, among other things. It means you always know what you’ll be paid if the insurer decides your car is a write-off. A write-off is when they decide your car can’t be repaired or would cost more to repair than its insured value. The insurer will specify the agreed value each year as your car gets older and give you the opportunity to discuss that amount if you wish.

Market value policies use the insurer’s estimated retail selling price of a typical car like yours on the day it was damaged. The downside is that you’re never sure exactly what you’ll be paid if your car is written off. Also, the insurer may or may not take the reducing value into account when calculating your premium each year.

What is a car insurance excess?

The ‘excess’ is the amount you’ll have to contribute to any claim. For example, if your excess is $500 and the repair costs $3,000, you pay $500 then the insurer pays $2,500. If you’re a young or inexperienced driver, your excess may be much higher to reflect the higher risk of dents and scrapes.

Most policies have a standard excess, but let you increase it in return for a lower premium. Before choosing a higher excess though, be sure you’ll always be able to pay that amount – otherwise there’s no point in having the insurance in the first place.

The excess might be refunded if another vehicle’s driver was found to be at fault and you were able to provide their registration and contact details to your insurer. If your car is stolen, your excess may be refunded if the offender is charged by police, for example. Check the policy details when you’re shopping around.

To cover the higher risk of inexperienced drivers using your car, most insurance policies have a second and higher excess if the damage happened when the car was being driven by someone under 25 or on a learner’s licence.

What does optional cover mean?

Optional cover or ‘cover options’ are like car insurance add-ons. They let you adjust the policy to better suit your needs. For example, if your car is essential for getting to and from work, you might like to add a rental car cover option to your policy. It will increase your insurance premium of course, but the value lies in more peace-of-mind and stress-reducing convenience if your car is damaged. If your car is not driveable, it might take a while before a repairer can get parts and start the work. Even simple repairs can see your car off the road for a few days.

Another popular cover option is excess-free glass cover. If your windscreen is damaged or side windows are smashed by a thief, this option means you won’t have to pay your policy’s excess. The insurer pays the full amount.

How can you reduce the cost of car insurance?

When you’re getting car insurance it’s important to shop around, get quotes and compare the policy details carefully to get the best cover for your needs at the best price. Once you’ve chosen a policy, there are usually several ways you might be able to reduce the premium. Here are some examples.

Pay annually in advance rather than monthly. If you can afford the annual premium, it’s usually cheaper overall. If you cancel your policy during the year, your insurer will simply refund the unused portion of what you have paid.

Get a multi-policy discount by having your other insurance policies with the same company. This can save you as much as 20%.

Choose a higher excess. However, as we mentioned above, make sure you’ll always be able to pay it.

Build a no-claims record by driving carefully, thinking about where you park and making every effort to avoid having to claim. Most policies will reward you with a no-claims discount that grows each year until you reach the allowed maximum. This can be something like 60% off after five years without a claim. Some insurers call this a no claims bonus, while others simply factor it into your premium each year without identifying it as a separate item. If you do make a claim, the discount starts from zero again and steadily rebuilds. If an accident is not your fault and you provide the other driver’s registration and contact details, most insurers will let you keep your current no-claims discount.

Consider fitting an alarm and immobiliser if your car doesn’t already have them. Apart from deterring thieves and giving you more peace-of-mind, the lower premium may soon repay the installation costs. The added security system will also help when it comes to selling your car.

Which are the best car insurance companies?

While getting the cover you need for the lowest price is important, things like customer service and an easy claims process will also affect the value you’re getting. This can really come into its own when you’re stressed or injured after an accident and just need the claims process to be as easy as possible.

When you’re looking at car insurance or your current policy is up for renewal, it’s always a good idea to talk with friends and family about their experiences. You can then compare car insurance companies and policies more holistically. 

Car insurance customer surveys conducted by independent organisations can also help reveal the different insurance providers’ reputations. A quick internet search will usually connect you with some results to consider. Rather than comparing prices, they tend to survey people about their online and call centre experiences, how easy it is to understand their policy details, their overall experience when claiming and how likely they are to recommend their insurer to others.

Why are some insurance claims declined?

After your car has been damaged there’s nothing worse than finding out your insurer won’t accept your claim. Every year, hundreds of people are so surprised by this they make a formal complaint to the insurance and financial services ombudsman.

One of the most common reasons for declined claims is that people didn’t let their insurer know about important events that can affect the insurer’s risk assessment. These include things like other insurance claims, criminal convictions, driving offences and even a change of address. Most other reasons for a decline were in the policy details, but the insured person hadn’t read and understood them fully, or had forgotten about them.

Here are some common reasons why car insurance claims are declined.

  • The insured car didn’t have a current warrant of fitness and the accident resulted from a defect in the car, such as low tyre tread or worn brakes.
  • The driver had been drinking or taking drugs and didn’t tell the insurer when making the claim.
  • The driver was breaking the conditions of their licence, such as not wearing required eyesight correction; having passengers in the car but no supervisor when on their learners or restricted licence; driving while disqualified; or not having a current driver licence.
  • The driver did not take ‘reasonable care’. For example they left the car unlocked and it was stolen.
  • They were driving illegally, such as using their phone while driving or travelling over the speed limit.
  • The car had been modified without letting the insurer know.

What’s the best way to make a car insurance claim?

Two things are important to help ensure your claim progresses smoothly – details and timeliness. Your policy will outline the exact process, but here are some common suggestions.

After an accident, first make sure you and others are safe. If anyone is injured call 111 and ask for an ambulance. Then, write down the other driver’s name, address, phone number, vehicle registration number and insurance details, as well as the names of any passengers. If there are witnesses, ask for their contact details. If the other driver won’t give you their details, call the police. If you damaged a parked car and can’t give the driver your details, report the accident to the police. You should also take photos of all damage and the location, but only if it’s safe to do so. Don’t rush to say it was your fault, because it might turn out it wasn’t.

As soon as you have the above details, phone your car insurance company. It ensures events are still fresh in your mind and helps them progress any claim. They’ll usually want to know the following:

  • Where the accident happened, such as street names and nearby numbers or buildings
  • What the weather, road and light conditions were like
  • A detailed description of what happened, including vehicle speeds, relative positions, road markings and anything that was limiting visibility, i.e. a bend in the road or a parked vehicle

What happens next?
Your insurer will explain the next steps, such as how to arrange towing if necessary and where to go for repairs.

Even if the damage is only minor and you decide to pay for it yourself, your policy will probably require you to let them know about any ‘vehicle-related incident’.

If you think that making a claim for minor damage won’t be worth it because it will increase your premium, you can discuss this with your insurer first. Small claims or accidents that weren’t your fault may not have much effect on your premium at all.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an insurance advice service. It is only intended to provide education about the New Zealand insurances sector. Nothing in this article constitutes a recommendation that any type of insurance cover is suitable for any specific person. We cannot assess anything about your personal circumstances, all of which are unique to you. Before making insurance decisions, we recommend you seek assistance from an insurance adviser or expert.

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