Choosing the right car insurance in New Zealand can feel like navigating a minefield of jargon and options. Deciding which add-ons are essential and which ones are just tempting extras can save you significant money and provide crucial peace of mind when you need it most. This guide will break down the most common car insurance add-ons available in New Zealand, helping you make informed decisions to protect yourself and your vehicle.
Understanding the Core Car Insurance Policies in NZ
Before diving into add-ons, it’s essential to understand the underlying insurance policies they supplement. In New Zealand, the core options are typically Third Party, Third Party Fire & Theft, and Comprehensive car insurance.
Third Party Insurance: This is the most basic and usually the cheapest option. It covers the damage you cause to someone else’s vehicle or property if you’re at fault in an accident. It doesn’t cover any damage to your own vehicle.
Third Party Fire & Theft Insurance: This builds on Third Party by adding cover for your vehicle if it’s damaged by fire or stolen. Crucially, it still doesn’t cover damage to your car if you’re at fault in an accident.
Comprehensive Insurance: This is the most extensive cover. It covers damage to your vehicle regardless of who is at fault, as well as damage to other vehicles and property. It also usually includes cover for fire, theft, and vandalism.
The choice between these core policies depends on your individual circumstances, including the age and value of your car, your budget, and your risk tolerance. Newer, more expensive cars are generally better suited to comprehensive cover, while older, less valuable cars might be adequately protected by third-party options.
The Must-Have Car Insurance Add-Ons
Now, let’s explore the add-ons that can significantly enhance your car insurance cover and offer valuable protection.
Full Glass Cover
New Zealand roads can be tough on windscreens. Chips and cracks from stones flung up by other vehicles are a common problem. Full glass cover typically waives the excess you’d normally pay to repair or replace your windscreen. It often includes side and rear windows too. Without this add-on, you could face a significant excess payment (typically $300-$500) for a windscreen replacement. Given the frequency of windscreen damage, especially if you frequently drive on highways or rural roads, this add-on is usually a worthwhile investment. Some insurers even offer this as a standard feature within their comprehensive policies.
Example: Sarah is driving on State Highway 1 when a truck kicks up a stone, cracking her windscreen. With full glass cover, she can get the windscreen replaced with no excess payment. Without it, she would have had to pay $400 excess.
No Claims Bonus Protection
Your No Claims Bonus (NCB) or No Claims Discount (NCD) is a discount you earn on your car insurance premium for each year you go without making a claim. It can significantly reduce your premium over time. No Claims Bonus Protection (NCB Protection) protects your discount even if you make a claim. Typically, you can make one or two at-fault claims without losing your bonus. This is particularly valuable if you’re a careful driver with a long history of no claims. The cost of NCB protection is generally small compared to the potential loss of your discount, which can be as high as 60-70% off your premium after several years of claim-free driving.
Example: Mark has a 60% No Claims Bonus. He accidentally reverses into a parked car and makes a claim. Without NCB Protection, his bonus would be significantly reduced at renewal. With protection, his bonus remains intact.
Roadside Assistance
Getting stranded on the side of the road due to a flat tyre, a dead battery, or a mechanical breakdown is a stressful experience. Roadside assistance provides 24/7 support, including services like jump-starts, tyre changes, fuel delivery (usually at your cost), and towing. Some policies even include accommodation and alternative transport if your car breaks down far from home. The cost of roadside assistance add-on is relatively low (typically around $50-$100 per year) compared to the cost of calling a tow truck or mechanic independently. If you drive an older car more prone to breakdowns, or if you frequently travel long distances, roadside assistance is a very worthwhile addition.
Example: Emily’s car battery dies in a remote area. She calls roadside assistance, and they jump-start her car, allowing her to continue her journey. Without roadside assistance, she would have had to wait hours for a tow truck and pay a hefty fee.
Trailer Cover
If you own a trailer and use it regularly, whether for work or leisure, you’ll need to ensure it’s adequately insured. Standard car insurance policies generally don’t cover damage to your trailer, or damage caused by your trailer to someone else’s property. Trailer cover provides this protection. Some policies offer specific trailer insurance, while others provide it as an add-on to your car insurance. Consider the value of your trailer and how frequently you use it when deciding whether to add this cover.
Example: John is towing his boat trailer when it detaches from his car and crashes into a fence. Without trailer cover, he would be liable for the damage to the fence. With trailer cover, his insurance covers the cost of repairs.
The Good-to-Have Car Insurance Add-Ons (Depending on Your Circumstances)
These add-ons can be beneficial, but their value depends heavily on your individual needs and risk tolerance.
Rental Car Cover
If your car is damaged in an accident and needs to be repaired, rental car cover provides a temporary replacement vehicle. The length of cover typically ranges from a few days to a few weeks, depending on the policy. This add-on can be particularly useful if you rely heavily on your car for work or family commitments. However, consider whether you have alternative transport options available, such as public transport or a second car, before adding this cover. Also, check if the rental car cover provides similar features to your main policy, such as equivalent liability cover. The daily payout of the rental vehicle often is not enough for a vehicle of the same class, so you should ensure that the daily limit is enough to provide you with a vehicle that meets your needs.
Example: David’s car is damaged in an accident and requires two weeks of repairs. With rental car cover, he receives a rental car for the duration of the repairs, allowing him to continue his daily commute. Without rental car cover, he would have had to rely on public transport or pay for a rental car out of pocket.
Signwriting Cover
If your car is used for business purposes and has signwriting or advertising on it, standard car insurance policies may not cover the cost of replacing or repairing the signwriting if the car is damaged. Signwriting cover provides this protection. Small businesses that rely on their vehicles for advertising find this add-on essential. Without specific signwriting cover, you would have to pay out of pocket to have your car re-signed.
Example: A plumber’s van with company signwriting is involved in an accident. With signwriting cover, the insurance covers the cost of replacing the damaged signwriting. Without it, the plumber would have to pay for the signwriting re-application themselves.
Key Replacement Cover
Losing your car keys can be a costly and inconvenient experience. Replacing modern car keys, especially those with transponders and immobilizers, can easily run into hundreds of dollars. Key replacement cover pays for the cost of replacing your lost or stolen car keys, including reprogramming the immobilizer. While this add-on provides peace of mind, consider the likelihood of losing your keys and the cost of the cover compared to the potential cost of replacement before opting for it.
Example: Anna loses her car keys at the beach. With key replacement cover, her insurance pays for the replacement keys and reprogramming the immobilizer. Without it, she would have had to pay a significant amount out of pocket.
Personal Property Cover
Some car insurance policies offer cover for personal belongings stolen from your car, such as laptops, phones, or bags. However, the coverage limit is often quite low (typically a few hundred dollars). Consider whether you regularly leave valuable items in your car and whether your home contents insurance already provides adequate coverage for these items. If you frequently carry expensive equipment or personal belongings in your vehicle, personal property cover may be worthwhile. However, it’s generally recommended to never leave valuable items visible in your car to deter theft.
Example: Someone steals a laptop from Peter’s car. With personal property cover, his insurance covers the cost of replacing the laptop, up to the policy limit. Without it, he would have had to claim through his home contents insurance or bear the loss himself.
Increased Liability Cover
While standard car insurance policies provide a certain level of liability cover (the amount they’ll pay for damage you cause to someone else’s property), you can often increase this limit for an additional premium. While rare, accidents can cause significant damage, potentially exceeding the standard liability limit. Increasing your liability cover provides additional protection in such cases. Consider your risk of causing a major accident and the potential financial consequences before opting for increased liability cover. It is generally not a necessary add-on for the majority of car owners.
For example, if a driver causes an accident that results in severe injuries or property damage to multiple vehicles, the costs can quickly escalate. While the chances of needing this high level of cover are relatively low, the potential financial consequences of not having it can be devastating.
The Car Insurance Add-Ons You Can Probably Skip
These add-ons offer limited value for most drivers and can often be safely skipped without significantly increasing your risk.
Excess Reduction
An excess is the amount you have to pay when you make a claim. Some insurers offer the option to reduce your excess for an additional premium. While a lower excess might seem appealing, the cost of the excess reduction can often outweigh the benefit, especially if you’re a careful driver who is unlikely to make a claim. Consider setting aside an emergency fund to cover your excess instead of paying for excess reduction. Also, consider increasing your core policy excess amount to lower your premium, as this can make more sense than paying extra to lower it later.
Example: You can reduce your excess from $500 to $250 by paying an extra $100 per year in premium. Over five years, you’ll pay $500 in extra premium. If you don’t make a claim during that time, you’ve essentially wasted that money.
Gap Insurance (for Older Cars)
Gap insurance covers the difference between the amount your insurer pays out for a written-off car (its market value) and the amount you still owe on your car loan. It’s generally most relevant for new cars that depreciate quickly. For older cars with minimal outstanding loans, gap insurance is usually unnecessary. The depreciation gap is likely to be negligible for vehicles more than five years old.
Example: You buy a brand-new car for $40,000 and finance $30,000. A year later, it’s written off in an accident, and the insurer pays out $30,000 (its market value). You still owe $25,000 on the loan. Gap insurance would cover the $5,000 difference. However, if your car is 10 years old and the payout is similar to the loan amount, the gap is non existant.
Purchase Price Protection (for Older Cars)
Some policies offer ‘purchase price protection’, which guarantees that if your car is written off, you’ll receive the original purchase price, rather than the current market value. This sounds good, but it is often only offered for a limited time (e.g. the first one or two years). As the car ages, the market value will diverge significantly from the purchase price, making this protection less relevant. Over the long term, this add on effectively becomes worthless.
Example: You buy a car for $20,000. After three years, it is written off, and the insurer pays out the reduced market value, because only for one year the insurer guarantees the original price.
Shop Around and Compare
The cost of car insurance and add-ons can vary significantly between insurers. It’s essential to shop around and compare quotes from multiple providers to find the best deal. Use online comparison websites to get started, but also consider contacting insurers directly to negotiate a better price. Pay close attention to the policy wording and exclusions to ensure you understand exactly what you’re covered for.
When comparing quotes, don’t just focus on the price. Consider the level of cover, the excess, and the included add-ons. A slightly more expensive policy with better cover and valuable add-ons can often be a better long-term investment.
Review Your Policy Regularly
Your car insurance needs can change over time as your car ages, your driving habits evolve, and your financial circumstances shift. Review your policy annually to ensure it still meets your needs and that you’re not paying for unnecessary add-ons. Consider increasing your excess to lower your premium or removing add-ons that are no longer relevant. Comparing rates annually, even if you do not remove add-ons, may show better deals and rates from different carriers. Be sure to keep shopping insurance rates.
Understanding Policy Exclusions
All car insurance policies have exclusions—situations or events that aren’t covered. Common exclusions include: damage caused by illegal activities, driving under the influence of alcohol or drugs, and deliberate damage to your vehicle. Read your policy carefully to understand the exclusions and ensure you’re not engaging in activities that could void your cover. Failing to disclose relevant information, such as a pre-existing medical condition that could affect your driving ability, can also invalidate your policy.
For example, if you’re using your car for commercial purposes (e.g., ride-sharing) without disclosing this to your insurer, your policy may be void if you have an accident. Similarly, if you’re driving with expired license and got into an accident, the insurer may not pay out especially if the accident was caused because of a expired license or medical condition that was not disclosed to them by the policy holder.
Dealing with Claims
Knowing how to handle a car insurance claim is crucial. In the event of an accident, prioritize safety and exchange information with the other driver(s) involved. Take photos of the damage and the accident scene. Contact your insurer as soon as possible to report the accident and start the claims process. Provide them with all relevant information, including the other driver’s details and any police reports. Cooperate fully with the insurer’s investigation. Delays in reporting an accident, or failure to provide information can result in longer claims processing or even denial from the car insurance company.
Be honest and accurate when providing information to the insurer. Misrepresenting the facts can invalidate your claim. If you disagree with the insurer’s decision, you have the right to dispute it. Most insurers have a formal complaints process. If you’re still not satisfied, you can contact the Insurance & Financial Services Ombudsman (IFSO) Scheme, an independent dispute resolution service. You can find information online at the IFSO website. The IFSO provides a free and impartial service to help resolve disputes between consumers and insurance providers and financial service providers. This will provide you with better options if you feel you have been given an unfair treatment.
Considering the Impact of Demographics
Car insurance premiums are heavily influenced by demographic factors, including age, gender, driving history, and location. Younger drivers and those with a history of accidents or traffic violations typically pay higher premiums. Similarly, drivers living in areas with high rates of car theft or vandalism may also face higher costs. While you can’t change your age or gender, you can take steps to improve your driving record and reduce your risk. Consider taking an advanced driving course to improve your skills and reduce your chances of an accident. Parking your car in a garage or secure location can also lower your risk of theft. These will help you lower your insurance premiums.
Utilizing Technology
Many insurers now offer telematics-based insurance products that use a device installed in your car to track your driving behavior. These devices monitor factors such as speed, braking, and cornering. If you demonstrate safe driving habits, you may be eligible for a discount on your premium. Telematics can be a great option for young drivers or those with a history of accidents, as it provides an opportunity to prove that you are a safe driver. However, be aware that poor driving behavior can lead to higher premiums. Some technology that may be used, is a blackbox or tracking application that can be utilized to assess how you are driving.
The Role of Credit Scores
While not as prevalent as in some other countries, your credit score can indirectly affect your car insurance premium in New Zealand. Insurers generally consider creditworthiness as a factor in assessing overall risk. A poor credit score may indicate a higher likelihood of making a claim or defaulting on payments, leading to a slightly higher premium. Maintaining a good credit score can therefore indirectly help to lower your car insurance costs.
FAQ Section
What is the difference between excess and premium?
Your premium is the amount you pay regularly (monthly or annually) for your car insurance cover. Your excess is the amount you have to pay out of pocket when you make a claim.
How does No Claims Bonus (NCB) work?
NCB is a discount you earn on your car insurance premium for each year you go without making a claim. The discount typically increases each year, up to a maximum amount (usually 60-70%).
Is comprehensive car insurance always the best option?
Not necessarily. Comprehensive insurance provides the most extensive cover, but it’s also the most expensive. If you have an older, less valuable car, third-party or third-party fire and theft insurance may be sufficient.
What happens if I don’t disclose information accurately to my insurer?
Failing to disclose relevant information, such as a history of accidents or modifications to your car, can invalidate your policy and result in a denied claim.
Can I cancel my car insurance policy at any time?
Yes, you can usually cancel your car insurance policy at any time. However, you may be charged a cancellation fee. If you’ve paid your premium annually, you may be entitled to a partial refund for the unused portion of your policy.
How does car insurance work if I let someone else drive my car?
Most car insurance policies cover other drivers who have your permission to drive your car. However, some policies may have restrictions on who can drive your car, such as age limits or requiring the driver to be named on the policy. Ensure that any other drivers are covered by your policy. Otherwise, the insurer may deny claims if the accident was caused by an unapproved driver.
What factors affect the cost of my car insurance?
Many factors can affect your car insurance premium. These include: Your age and driving experience, the type of car you drive, your location, your claims history, the level of cover you choose, and your excess amount.
References List
Insurance & Financial Services Ombudsman (IFSO) Scheme – https://www.ifso.nz/
Take Action Now
Don’t wait until you’re involved in an accident to think about your car insurance. Take the time to carefully assess your needs, compare quotes from multiple insurers, and choose a policy that provides adequate cover at a price you can afford. Review your policy regularly to ensure it still meets your changing needs. Protecting yourself and your vehicle with the right car insurance is a smart investment that can provide peace of mind and financial security in the event of an unexpected incident. By using the informations and tips provided in this article, you will be able to make the best choices possible to ensure you are covered.
