Getting your driver’s license in New Zealand is a huge step towards independence, but it also introduces a new responsibility: car insurance. As a new driver, especially on a learner or restricted license, you’ll likely face higher insurance premiums. However, with smart planning and careful choices, you can significantly reduce these costs. This article explores practical strategies and insights to help you navigate the insurance landscape and secure affordable coverage.
Understanding the New Zealand Car Insurance Landscape
New Zealand has a unique car insurance environment. Unlike some countries, third-party insurance isn’t legally mandatory. However, the Accident Compensation Corporation (ACC) provides no-fault personal injury cover for everyone in New Zealand, regardless of fault in a car accident. This means ACC covers the cost of treating injuries from car accidents, but it doesn’t cover vehicle damage or property damage. Therefore, car insurance is crucial for protecting your vehicle and other assets.
There are primarily three types of car insurance available in New Zealand:
- Third Party Insurance: This is the most basic and cheapest option. It covers damage you cause to someone else’s vehicle or property, but it doesn’t cover damage to your own vehicle.
- Third Party, Fire and Theft Insurance: This covers the same as third-party insurance, plus damage to your vehicle caused by fire or theft.
- Comprehensive Insurance: This offers the most extensive coverage, including damage to your vehicle, even if the accident is your fault, as well as damage caused by uninsured drivers, natural disasters, and vandalism.
The cost of your premium is influenced by a variety of factors, including your age, driving history, the type of car you drive, where you live, and the level of coverage you choose.
The Impact of Learner and Restricted Licenses on Insurance Costs
Holding a learner or restricted license automatically increases your insurance premiums. Insurance companies view new drivers as higher risk due to their lack of experience. Statistics consistently show that inexperienced drivers are more likely to be involved in accidents. For example, a study might indicate that drivers in the 16-24 age bracket are statistically more likely to file a claim than drivers in the 35-55 age bracket.
Here’s why:
- Lack of Experience: New drivers haven’t had the opportunity to develop hazard perception and defensive driving skills.
- Higher Risk-Taking Behavior: Younger drivers are sometimes more prone to speeding, distracted driving, and other risky behaviors.
- Inexperience in Handling Emergency Situations: New drivers may not react appropriately in unexpected situations, leading to accidents.
Because of this increased risk, insurance companies charge higher premiums to offset the potential cost of claims. It is something you have to grin and bear to begin with, whilst mitigating the risks and costs over time as you gain experience.
Strategies to Lower Your Car Insurance Premiums as a New Driver
Even though being a new driver increases your premiums, you’re not entirely powerless. Here are several actionable strategies you can implement to lower your insurance costs:
1. Choose Your Car Wisely
The type of car you drive has a significant impact on your insurance costs. Avoid high-performance vehicles, sports cars, or cars known for being frequently stolen. Instead, opt for a safer, more practical vehicle with a good safety rating. Cars with advanced safety features like anti-lock brakes (ABS), electronic stability control (ESC), and airbags can also help lower your premiums. Research different models and compare insurance quotes before making a purchase. Consider a car with a lower engine size (e.g., under 1600cc) as they are generally cheaper to insure. Websites focused on safety ratings, such as the New Zealand Transport Agency (NZTA) website, are an excellent source of objective information.
Example: Instead of buying a high-powered sports car, consider a reliable sedan with a good safety record. You’ll not only save on insurance but also on fuel consumption and maintenance costs.
2. Complete an Advanced Driving Course
Taking an advanced driving course demonstrates your commitment to safe driving and can potentially lower your insurance premiums. Some insurance companies offer discounts to drivers who have completed approved courses. These courses typically cover defensive driving techniques, hazard perception, and emergency handling skills. Contact your insurance provider to see if they offer discounts for specific courses. This also has the added benefit of making you a better, safer and more confident driver.
Example: The AA (Automobile Association) offers advanced driving courses in New Zealand. Completing one of these courses could make you eligible for a discount with some insurance providers.
3. Increase Your Excess
The excess is the amount you pay out-of-pocket when you make a claim. Choosing a higher excess will lower your premium, but it also means you’ll have to pay more if you’re involved in an accident. Carefully consider your financial situation and choose an excess you can comfortably afford. If you are confident in your driving and not at fault frequently, it can save a significant amount. It is a gamble of sorts, and you can be caught out.
Example: Increasing your excess from $500 to $1000 could reduce your premium by several hundred dollars per year. However, make sure you have adequate savings to cover the $1000 in case of an accident.
4. Shop Around and Compare Quotes
Never settle for the first insurance quote you receive. Compare quotes from multiple insurance companies to find the best deal. Online comparison websites can help you quickly compare quotes from different providers. Pay attention to the fine print, including what is covered, what is excluded, and the excess amount. Don’t just focus on the price – consider the reputation and customer service of the insurance company as well. Look for reviews of the company online from genuine customers.
Example: Use online comparison websites like Compare Insurance or Glimp, and also get quotes directly from major insurance providers like AA Insurance, AMI, and State Insurance.
5. Bundle Your Insurance
Some insurance companies offer discounts if you bundle your car insurance with other insurance policies, such as home, contents, or travel insurance. If you already have other insurance policies, check with your existing provider to see if they offer a multi-policy discount.
Example: If you also need home insurance, getting both your car and home insurance from the same provider could save you a significant amount. But be wary of this, as sometimes bundling the policies isn’t the cheapest option. Do the sums.
6. Build a No-Claims Bonus
A no-claims bonus is a discount you receive for not making any claims on your insurance policy. The longer you go without making a claim, the larger your discount will be. Drive safely and avoid accidents to build up your no-claims bonus over time, and be careful when and where you drive your vehicle. Some insurance providers even allow you to transfer your no-claims bonus from another country.
Example: After a few years of driving without making a claim, your no-claims bonus could reduce your premium by as much as 50%.
7. Be Honest About Your Driving History
It’s crucial to be honest about your driving history when applying for car insurance. Withholding information or providing false information can invalidate your policy and leave you uninsured. Insurance companies will often check your driving record, so it’s best to be upfront about any previous accidents or traffic violations, even those for minor offences.
Example: Even a minor speeding ticket can affect your premium. It’s better to disclose it upfront than to have the insurance company discover it later and potentially deny your claim. It also is useful to understand which driving penalties affect your demerit points and how being over a certain threshold can lead to a driving ban.
8. Install Security Devices
Installing security devices in your car, such as an alarm, immobilizer, or GPS tracking system, can deter theft and potentially lower your insurance premiums. Some insurance companies offer discounts for vehicles equipped with approved security devices – make sure you have the paperwork to evidence the installation. The effectiveness of these devices varies depending on the type of device and the area where you live.
Example: A car alarm system can deter thieves and reduce the risk of your car being stolen. A GPS tracking system can also help recover your car if it’s stolen, thus reducing the insurance company’s risk.
9. Park Your Car Safely
Where you park your car can also affect your insurance premiums. Parking in a garage or secure parking facility reduces the risk of theft and vandalism compared to parking on the street. Inform your insurance company where you typically park your car, as this can influence your premium. Some insurance companies will ask where the vehicle is stored overnight during the application process.
Example: Parking your car in a locked garage overnight can significantly reduce the risk of theft and vandalism compared to parking it on a busy street.
10. Add a More Experienced Driver to Your Policy
Adding a more experienced driver to your policy can sometimes lower your premium, especially if they have a clean driving record. This is because the insurance company assumes that the experienced driver will supervise the new driver and reduce the risk of accidents. The experienced driver will also need to have the relevant license to be your supervisor depending on what stage of the licensing process you are in. Make sure that the experienced driver actually drives the car regularly; otherwise, this might not be the correct option if the insurance company finds out.
Example: Adding your parent or a family member with a long history of safe driving to your policy (even if they rarely drive the car) may reduce your premium.
11. Review Your Policy Regularly
Your insurance needs may change over time. Review your policy annually and update your coverage as needed. This will save you money. As you gain experience, get older, and your responsibilities change, it might be worthwhile to reduce the level of insurance such as moving to the equivalent of Fire and Theft cover only. It is also useful to check each year how much the car is realistically worth as values can change significantly depending on the make, model, age and history of the vehicle.
Example: If you move to a safer neighborhood or improve your driving record, you may be eligible for a lower premium. Reaching a certain age can also drop insurance prices due to actuarial evidence.
12. Consider Pay-As-You-Go Insurance
Pay-as-you-go insurance (also known as usage-based insurance) is a type of car insurance where your premium is based on how much you drive. This can be a good option if you drive infrequently or only for short distances. Pay-as-you-go insurance typically uses telematics devices to track your driving habits, such as distance traveled, driving speed, and braking patterns. Check for new providers in the marketplace – such as those using apps and smart technology – for the most competitive prices.
Example: If you only drive your car on weekends or for occasional errands, pay-as-you-go insurance could be significantly cheaper than traditional car insurance.
13. Maintain a Good Credit Score
While not as common in New Zealand as in some other countries, some insurance companies may consider your credit score when determining your premium. A good credit score can indicate financial responsibility, which may lead to lower insurance rates. Improving your credit score by paying bills on time and reducing debt can indirectly benefit your insurance costs.
Example: If you have a history of late payments or high debt, working to improve your credit score can potentially lead to lower insurance premiums in the long run; albeit possibly not directly.
14. Be Aware of Specific Policy Features
Certain policy features can significantly impact the cost and attractiveness of your car insurance. Understanding these features can help you make informed decisions. Some major policies to consider are:
- Windscreen Cover: A common, and often claimed-on feature. If your windscreen is chipped and you have full windscreen cover, it can be repaired or replaced at no cost. However, with cheaper insurance policies, this is a specific amount – e.g. $200 for a chip, and the excess applies for a full replacement.
- ‘At Fault’ Accidents: If you cause an accident (such as hitting a parked car) and have insurance cover, you will likely have to pay an excess amount to cover the repairs to both vehicles involved.
- Uninsured Driver Cover: This policy covers damages to your vehicle if you are hit by an uninsured driver. It can cover damages that you may have otherwise been out of pocket for.
- Legal Liability Cover: If you are found legally responsible for damages or injuries, this cover helps pay those costs.
Case Studies: Real-World Examples of Saving on Car Insurance
To illustrate how these strategies work in practice, let’s look at a couple of hypothetical case studies:
Case Study 1: Sarah, a 17-year-old Learner Driver
Sarah just got her learner license and wants to buy insurance for the family car she’ll be driving. Initially, she received a quote of $2500 per year for comprehensive insurance. Here’s how she lowered her premium:
- Added her mother to the policy: Sarah’s mother, who has a clean driving record for over 20 years, was added to the policy as a secondary driver. This immediately lowered the premium by $500.
- Increased the excess: Sarah increased the excess from $500 to $750, which reduced the premium by another $200.
- Completed a defensive driving course: Sarah completed an AA defensive driving course, which qualified her for a further 5% discount.
- Secured Multi-policy discount: Sarah had the car insurance bundled by the same insurance provider that also insures the house for discounted rates.
By implementing these strategies, Sarah reduced her annual premium from $2500 to $1650, a saving of $850.
Case Study 2: Michael, a 20-year-old Restricted Driver
Michael has been driving on his restricted license for a year and is looking to buy his own car. He received quotes ranging from $1800 to $2800 per year for comprehensive insurance. Here’s how he found the best deal:
- Chose a safer car: Michael decided against buying a sporty coupe and opted for a used Toyota Corolla with a good safety rating which also reduced fuel costs. This reduced the cost of the premium.
- Compared quotes online: Michael used multiple online comparison websites to compare quotes from different providers. He discovered that prices can change quickly and be radically different over multiple providers.
- Negotiated with the insurance company: Michael used the lowest quote he received as leverage to negotiate with his preferred insurance provider. They managed to match the price, while offering superior features better suited to him.
By being proactive and informed, Michael managed to secure comprehensive insurance for $1600 per year, saving him potentially $1200 per year.
FAQ Section
Q: Why is car insurance so expensive for new drivers?
A: New drivers are statistically more likely to be involved in accidents due to their lack of experience. Insurance companies charge higher premiums to offset this increased risk.
Q: What is the minimum car insurance I need in New Zealand?
A: There is no legal requirement for third-party car insurance in New Zealand. The ACC covers personal injury claims, and you can legally drive without car insurance. However, if you cause damage to another person’s vehicle or property, you will be personally liable for the cost of repairs. As such, taking out car insurance is highly recommended as you never know what might happen – and it could be a very expensive mistake if not!
Q: Does it matter where I live when it comes to the cost of car insurance?
A: Yes, your location can influence your insurance premiums. If you live in a high-crime area, your insurance costs may be higher due to the increased risk of theft or vandalism. Areas that are more prone to accidents will also increase the costs. Likewise, areas further out of main cities (such as remote rural towns) may be a bit cheaper due to lower risks for insurance companies.
Q: Can I get a discount if I install a dashcam in my car?
A: While not universally offered, some insurance companies may provide a discount for installing a dashcam in your car. A dashcam can provide valuable evidence in the event of an accident, which can help streamline the claims process.
Q: What happens if I let someone else drive my car and they have an accident?
A: If you let someone else drive your car and they have an accident, the insurance policy will usually cover the damages, provided that the driver has a valid license and that you didn’t breach any terms of the policy (e.g., allowing an unlicensed driver to operate the vehicle). However, you may still have to pay the excess. Some policies might also limit coverage to only named drivers. Be sure to read the fine print.
Q: How can I reduce my insurance costs while on a learner licence?
A: Some of the best ways to reduce your insurance costs while on a learner licence include being added to a parent’s or guardian’s policy, choosing a less expensive car to insure, shopping around for quotes, increasing your excess amount, and completing an advanced driving course. Taking an advanced driving course can improve your driving skills, reduce the risk of accidents and improve your confidence as a driver.
Q: Will my car insurance premium decrease when I go from a learner licence to a restricted licence?
A: Your car insurance premium may not automatically decrease when you progress from a learner licence to a restricted licence, as drivers in both categories are still considered less experienced. However, it is something that some providers allow, so check beforehand and do your sums.
Q: How long does it take to build a significant no-claims bonus?
A: It typically takes several years to build a significant no-claims bonus. The exact amount of the discount varies depending on the insurance company, but after five or more years of claim-free driving, you could potentially receive a discount of up to 50%.
References
- Accident Compensation Corporation (ACC)
- New Zealand Transport Agency (NZTA)
- AA (Automobile Association)
- Compare Insurance
- Glimp
- AA Insurance
- AMI
- State Insurance
Reducing your car insurance costs as a new driver in New Zealand requires proactive planning and informed decision-making. By choosing your car wisely, completing advanced driving courses, shopping around for quotes, and employing other strategies outlined in this article, you can significantly lower your premiums and make your driving expenses more manageable. Don’t wait – start implementing these tips today and take control of your insurance costs. Compare quotes from multiple providers today and find a insurance policy that will work for you!
