Lowering your car insurance excess in New Zealand boils down to understanding your risk profile, comparing policies diligently, and taking proactive steps to prove you’re a safe driver. It’s about finding the sweet spot where affordability meets peace of mind.
Understanding Car Insurance Excess in New Zealand
Car insurance excess is the amount you agree to pay out-of-pocket when you make a claim. Think of it as your contribution towards repairs or replacement. The excess amount directly impacts your premium: a higher excess typically translates to a lower premium and vice-versa. This is because you’re taking on more of the financial risk. In New Zealand, excess options can vary widely, depending on the insurer and the specific policy. Some policies might have a standard excess, while others let you choose from a range of amounts. It’s important to choose an excess you can comfortably afford should the unexpected happen.
The Impact of Excess on Your Premium
The relationship between excess and premium is an inverse one. By increasing your excess, you’re effectively signaling to the insurer that you’re less likely to file small claims. Imagine two scenarios: in the first, you have a $400 excess; a minor fender bender costing $600 means you’ll claim $200 and pay $400. In the second, you have a $1000 excess; that same fender bender means you foot the entire bill. In the latter situation, the insurer saves administrative costs associated with processing claims and potentially avoids paying anything out, which translates into lower premiums for you. Some insurers even offer online calculators that allow you to see how changing your excess amount will affect your premium.
Factors Affecting Your Car Insurance Premium and Excess Options
Several factors influence both your premium and the available excess options. These can be broadly categorized as driver-related, vehicle-related, and geographical factors.
Driver-Related Factors:
- Age and Driving Experience: Younger drivers with less experience typically face higher premiums and potentially fewer excess options due to their perceived higher risk. As you gain experience and maintain a clean driving record, your premiums will likely decrease, and more favorable excess options may become available.
- Driving History: A history of accidents and traffic violations will almost certainly result in higher premiums and potentially reduced excess choices. Insurers view you as a higher risk, and they compensate for that risk by charging more. Conversely, a clean driving record is rewarded with lower premiums and more flexible excess options.
- Claims History: Similar to driving history, a history of insurance claims indicates a higher likelihood of future claims. This leads to increased premiums and potentially fewer low-excess options.
Vehicle-Related Factors:
- Type and Value of the Car: The make, model, and age of your car significantly impact insurance costs. High-performance vehicles or those that are expensive to repair will typically attract higher premiums and potentially limit your access to lower excess options. Cheaper or older vehicles may have lower premiums, but you might also find that low excess options are more expensive.
- Security Features: Cars equipped with advanced security features, such as alarms, immobilizers, and tracking devices, are seen as less likely to be stolen or broken into. Some insurers offer discounts on premiums for these features, which can indirectly influence your willingness to choose a higher excess.
- Usage: How you use your car (e.g., commuting to work, occasional trips) also plays a role. High-mileage drivers are exposed to more risk and may face higher premiums.
Geographical Factors:
- Location: Where you live can affect your insurance costs. Urban areas with higher traffic density, crime rates, or accident rates often lead to higher premiums.
- Parking: Whether you park your car in a secure garage or on the street can influence your risk profile. Cars parked in garages are less likely to be damaged or stolen, potentially impacting your premium.
Strategies for Lowering Your Car Insurance Excess
Now that we’ve covered the basics, let’s dive into actionable strategies for lowering your car insurance excess.
1. Shop Around and Compare Quotes:
This is the golden rule of insurance. Don’t settle for the first quote you receive. Obtain quotes from multiple insurers and carefully compare their offerings. Use online comparison websites, but also consider contacting insurers directly, as some may offer deals not available through aggregators. Pay close attention to the policy details, including the excess amounts and the associated premiums. Look for insurers that offer flexible excess options so you can fine-tune your policy to your needs and budget. Be sure that you compare the exact same coverage levels when you shop around. A cheap price may not provide the level of cover you expect. For example, third party insurance will always be significantly cheaper than comprehensive insurance but at the cost of reducing the level of cover that you have.
2. Increase Your Excess:
As previously mentioned, raising your excess can significantly reduce your premium. However, only do this if you can comfortably afford to pay the higher excess amount in the event of a claim. Consider setting aside savings to cover your excess. For example, instead of a $500 excess, you could choose a $1000 excess and put the savings in premium into a designated “car insurance excess” savings account. Remember that you will need to be happy paying for smaller repairs yourself if you do this.
3. Demonstrate Safe Driving Habits:
Insurers reward safe driving. Here are some ways to demonstrate your commitment to safe driving:
- Maintain a Clean Driving Record: Avoid traffic violations and accidents. A clean driving record is a powerful negotiating tool when it comes to insurance premiums and excess options.
- Consider a Driving Course: Completing an advanced driving course can not only improve your driving skills but also potentially qualify you for a discount with some insurers. The New Zealand Transport Agency (NZTA) provides information on approved driving courses.
- Install a Dash Cam: While a dash cam doesn’t directly lower your excess, it can provide valuable evidence in the event of an accident, potentially speeding up the claims process and reducing disputes.
4. Improve Your Car’s Security:
Enhancing your car’s security features can reduce the risk of theft and damage, making you a more attractive customer to insurers.
- Install an Alarm System: A professionally installed alarm system can deter thieves and potentially qualify you for a discount.
- Use an Immobilizer: An immobilizer prevents your car from being started without the correct key or code. Many modern vehicles come with immobilizers as standard.
- Consider a Tracking Device: A GPS tracking device can help recover your car if it’s stolen. Some insurers offer discounts for vehicles equipped with tracking devices.
- Park in Secure Locations: Whenever possible, park your car in a garage or a well-lit, secure parking area rather than on the street.
5. Bundle Your Insurance Policies:
Many insurers offer discounts if you bundle your car insurance with other insurance policies, such as home or contents insurance. Check with your insurer to see if bundling can save you money and potentially influence your excess options. The discounts may not be huge but are often worth having and can create loyalty and encourage you to remain with an insurer for the long term.
6. Review Your Policy Regularly:
Your insurance needs and risk profile can change over time. It’s essential to review your policy regularly, ideally at least once a year, to ensure it still meets your needs. You might find that you can increase your excess without significantly impacting your budget, or that your circumstances have changed, making you eligible for lower premiums. If you move house this can be a very good time to review your policy.
7. Negotiate with Your Insurer:
Don’t be afraid to negotiate with your insurer. If you’ve received a lower quote from another insurer, let your current insurer know. They may be willing to match or beat the offer to retain your business. You can also try negotiating your excess amount. This is more likely to be successful if you have a long-standing relationship with the insurer and a good claims history. It is often better to have been a customer with the same insurer for a few years to be able to negotiate successfully.
8. Consider Usage-Based Insurance:
Some insurers offer usage-based insurance policies, also known as pay-as-you-drive insurance. These policies track your driving behavior using a telematics device and reward safe driving with lower premiums. While these policies may not directly impact your excess amount, they can help you reduce your overall insurance costs and potentially make it easier to afford a lower excess if you wish. This type of insurance is more popular for people who drive less than average.
9. Pay Annually Instead of Monthly:
Paying your insurance premium annually instead of monthly can sometimes result in a discount. This is because insurers prefer to receive a lump sum payment upfront, which reduces their administrative costs. The savings may not be substantial, but every little bit helps.
10. Take Advantage of Loyalty Discounts:
Many insurers reward long-term customers with loyalty discounts. If you’ve been with the same insurer for several years and have a good claims history, inquire about loyalty discounts. Even if the amount is quite small it will always be a welcome discount.
Case Studies
Let’s examine a couple of hypothetical case studies to illustrate how different strategies can impact excess and premiums.
Case Study 1: Young Driver
Sarah, a 22-year-old student, recently purchased her first car, a used Toyota Corolla. As a new driver, she was quoted a high premium with a standard excess of $750. Sarah decided to take the following steps:
- Shop Around: She obtained quotes from multiple insurers and found that premiums varied significantly.
- Increase Excess: After carefully considering her budget, she opted to increase her excess to $1250, which reduced her premium by 15%.
- Install Alarm System: She installed an aftermarket car alarm which further reduced her premium
By taking these steps, Sarah significantly lowered her premium while still maintaining adequate coverage. She also opened a “car insurance excess” savings account and slowly added money to the account to cover the excess. This helped her prepare for the possibility of having to pay the excess.
Case Study 2: Experienced Driver
John, a 45-year-old professional with a clean driving record, has been insured with the same company for 10 years. He currently has a low excess of $400. John decided to review his policy to see if he could save money.
- Negotiate: John contacted his insurer and negotiated a lower premium based on his long-standing customer status and clean driving record.
- Increase Excess: John then increased his excess to $750, which reduced his premium by a further 10%.
- Bundle Policies: John then bundled his car insurance with his home insurance, which reduced his total insurance costs by a further small amount.
John’s proactive approach resulted in significant savings without sacrificing essential coverage. By increasing his excess amount slowly and gradually over time. He took into account his affordability and made an educated decision.
Navigating Situations Where You Can’t Lower Your Excess
Sometimes, despite your best efforts, lowering your excess might not be possible or practical. This can be due to factors such as your age, driving history, or the type of car you own. In these situations, consider the following alternative strategies:
- Focus on Comprehensive Coverage: Even if you can’t lower your excess significantly, ensure that your policy provides comprehensive coverage for a wide range of risks, including accidents, theft, and damage. This will give you peace of mind knowing that you’re protected against unforeseen events.
- Build an Emergency Fund: Start building an emergency fund specifically to cover your excess amount in the event of a claim. This will ensure that you have the funds readily available without having to resort to debt or financial hardship.
- Consider Gap Insurance: If you have a newer car that you financed, consider purchasing gap insurance. Gap insurance covers the difference between the amount you owe on your loan and the car’s actual value in the event it’s written off.
- Maintain Good Car Maintenance: Keep up with the regular servicing of your car to help keep it running well and avoid it breaking down.
Special Considerations for Specific Groups
Certain demographics may face unique challenges or opportunities when it comes to lowering their car insurance excess.
Young Drivers:
Young drivers typically face high premiums and limited excess options due to their lack of experience. Emphasize completing advanced driving courses, maintaining a clean driving record, and driving safe vehicles to improve your risk profile. Consider adding parents as named drivers to the policy as this can reduce costs for young drivers.
Senior Drivers:
Senior drivers may also face higher premiums due to age-related factors. Focus on demonstrating safe driving habits, maintaining good health, and considering specialized insurance policies designed for seniors. Discuss with your insurers any medical conditions or limitations to get the most appropriate cover.
Learner Drivers:
Learner drivers must be supervised by a fully licensed and experienced driver. Ensure that the supervising driver is listed on the insurance policy and that the policy covers learner drivers. When practicing with a learner driver, make sure they are driving a safe vehicle.
Common Car Insurance Mistakes to Avoid
Avoiding these common mistakes can help you lower your car insurance excess and save money:
- Underestimating Your Mileage: Accurately estimate your annual mileage. Underestimating it can lead to inaccurate premiums and potential claim issues.
- Failing to Disclose Information: Be honest and transparent with your insurer. Failing to disclose relevant information, such as previous accidents or driving convictions, can invalidate your policy.
- Choosing the Wrong Coverage: Ensure that you have the right level of coverage for your needs. Don’t simply opt for the cheapest policy without considering the potential risks.
- Not Understanding Policy Exclusions: Carefully review your policy document to understand any exclusions or limitations. This will help you avoid surprises in the event of a claim.
- Not Maintaining Your Vehicle: Regular vehicle maintenance is essential for safety and can help you avoid accidents. Neglecting maintenance can also void your insurance policy.
The Future of Car Insurance and Excess in New Zealand
The car insurance landscape in New Zealand is constantly evolving, with new technologies and trends shaping the way insurers assess risk and price policies. Here are some potential future developments:
- Increased Use of Telematics: Usage-based insurance policies that track your driving behavior using telematics devices are likely to become more widespread. This could lead to more personalized premiums and excess options based on individual driving habits.
- Autonomous Vehicles: As autonomous vehicles become more common, the traditional car insurance model may need to adapt. The liability for accidents involving self-driving cars could shift from the driver to the vehicle manufacturer or technology provider.
- Data-Driven Pricing: Insurers are increasingly using data analytics to assess risk and price policies. Your online behavior, social media activity, and other digital information could potentially be used to determine your premium and excess.
FAQ Section
What is the difference between standard excess and voluntary excess?
Standard excess is the default amount set by the insurer and it applies to all claims. Voluntary excess is the amount you choose to add on top of the standard excess, in exchange for a lower premium. For instance, if the standard excess is $500 and you choose a voluntary excess of $250, your total excess is $750.
Will a small claim affect my insurance premium?
Yes, even a small claim can potentially affect your premium upon renewal. Insurers consider claims history as a factor in assessing risk, and even a minor claim can indicate a higher likelihood of future claims. However, the impact may vary depending on the insurer and the specific circumstances of the claim.
How can I find the best car insurance deal in New Zealand?
Finding the best deal involves shopping around, comparing quotes, and considering your individual needs and risk profile. Use online comparison websites, contact insurers directly, and negotiate to find the most competitive price. Don’t just focus on the premium; also consider the policy coverage, excess amount, and customer service reputation.
What happens if I can’t afford to pay my excess after an accident?
If you can’t afford to pay your excess, the insurer may not proceed with your claim. This means you would be responsible for covering the full cost of repairs or replacement. It’s crucial to choose an excess amount that you can comfortably afford in the event of an accident. You may be able to negotiate a payment plan with the repairer, or alternatively you may consider getting some debt consolidation to help repay the amount.
Can I lower my excess after making a claim?
It’s less likely that you will be able to immediately lower your excess right after a claim. Your insurer is more likely to increase your premium upon renewal due to your claims history. You may be able to lower your excess after a period of time (e.g., a year or two) if you maintain a clean driving record. However, you should check with your insurer for their specific policies.
References List
- New Zealand Transport Agency (NZTA) – Information on Approved Driving Courses
- Financial Services Council (FSC) – Information and Resources on Insurance
Don’t leave your car insurance to chance. Start taking control today! Compare quotes, review your policy, and implement the strategies discussed to lower your excess and save money. The peace of mind knowing you have the right coverage without breaking the bank is worth the effort.
