The difference between a $500 excess and a $1,500 excess on your car insurance could save you a couple of hundred dollars a year. But if you can’t actually afford that $1,500 when you need to claim, the saving was never really yours. Choosing an excess is one of the few parts of a car insurance policy you directly control, and getting it right means balancing a lower premium against what you’d actually pay if something happens. Here’s what you actually need to know.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Most people focus on the premium when they buy car insurance. That’s understandable — it’s the number you see every month or year. But the excess is the number that actually hits your bank account when you make a claim, and it can be a lot more than the single figure you picked at sign-up. Multiple excesses can stack on top of each other depending on who was driving, their age, and the circumstances of the incident. Understanding how they work is the difference between a manageable bill and a nasty surprise.
How Car Insurance Excess Actually Works
An excess is the amount you pay towards an accepted claim. It’s your share of the risk — the insurer covers the rest, up to your policy limits. Consumer Protection NZ puts it plainly: apart from some windscreen cover, you’ll pay an excess no matter which policy or cover type you hold. That’s a good starting point for understanding why the details matter.
Standard Excess
This is the base figure on your policy schedule. For most NZ policies it falls in the $400–$500 range, though it varies by insurer, vehicle, and driver profile. It applies to every claim unless a specific exemption kicks in.
Voluntary Excess
You can choose to add a voluntary excess on top of the standard one. The trade-off is straightforward: a higher voluntary excess lowers your premium. The Insurance Council of New Zealand’s guide notes that in a typical structure the voluntary excess is added to the standard excess, so your total contribution could be the sum of both. Always check whether your policy operates that way — some wordings treat them differently.
Imposed and Graduated Excesses
An imposed excess is one the insurer applies under specific circumstances — for example, if your car is modified or parked in a high-risk area. A graduated excess changes depending on the circumstances of the claim, such as the type of damage or who was driving. Both sit on top of your standard excess.
Driver-Related Excesses
This is where things get layered. Vero’s MotorPlan wording names six additional excess types that can apply, including an unnamed driver excess, a new driver excess, an underage excess, and a special excess. They add together on a single claim. For young or inexperienced drivers, the numbers can be significant. Cove Insurance, for instance, applies a $500 excess for drivers aged 21–24 and $1,000 for anyone without a full New Zealand licence — and won’t cover drivers under 21 at all. State takes a different approach, applying the same $300 standard excess to drivers under 25. The point is that the excess you think you’re paying might not be the one that applies when a claim happens.
Glass Claims
Windscreens are the one area where an excess sometimes disappears. Some policies offer excess-free glass repair, but the scope is policy-specific. Vero, for example, charges no excess if the windscreen is repairable but applies a $500 excess if it needs replacing. Tower includes automatic glass cover with an optional buy-out that removes the excess, though it explicitly excludes sunroofs, panoramic roofs, mirrors, and lights. Read the glass section of your policy wording before assuming you won’t pay anything.
Not-at-Fault Claims
Being not at fault doesn’t automatically remove your excess. Consumer Protection NZ says an insurer may waive or refund it if you can prove you weren’t at fault and provide the other driver’s name, address, and telephone number. Insurers can set additional requirements in their policy wording, so the process isn’t guaranteed. If you’re in an accident, collect the other driver’s contact details, vehicle registration, photos, and witness information where it’s safe to do so, and ask your insurer in writing what it needs to assess a waiver.
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| Sum Insured | $500 Excess | $1,000 Excess | $1,500 Excess |
|---|---|---|---|
| $5,500 | $987/yr | $895/yr | $849/yr |
| $10,500 | $1,152/yr | $1,005/yr | $925/yr |
| $15,500 | $1,251/yr | $1,125/yr | $1,004/yr |
The table above uses a real example — a 40-year-old in Auckland with a 2015 Toyota Aqua — to show how premium changes as both excess and sum insured move. Going from a $500 excess to $1,500 saves roughly $200–$250 a year depending on the sum insured. That’s meaningful, but it only works if you could actually pay $1,500 tomorrow without borrowing.
What Breaks When You Misunderstand Your Excess
The most common problem is straightforward: people set an excess they can’t afford because they only looked at the premium saving. If your excess is $1,500 and you have $800 in savings, you’re effectively uninsured for the first $700 of any claim — you’d need to borrow or put it on a credit card. That’s a bad position to be in after an accident.
Another scenario that catches people out is the stacking of multiple excesses. A young driver on a policy with a $500 standard excess, a $250 voluntary excess, and a $500 underage excess faces a total of $1,250 before the insurer pays anything. If they didn’t know about the underage excess, that’s a shock. The same logic applies to unnamed drivers — if your policy names drivers and someone else drives your car, an additional excess (or even a declined claim) can apply. Consumer Protection NZ is blunt: if you name drivers and let someone else use the car, the insurer is unlikely to honour the claim.
Total-loss claims add another layer. If your car is written off, the settlement is reduced by the applicable excess. Whether a voluntary excess also applies depends on the policy wording — it shouldn’t be assumed either way. NZTA notes that when a vehicle is damaged and the insurer decides not to repair it, the insurer must cancel the registration if the vehicle’s safe tolerance has been compromised, and a safety flag may be added to the Motor Vehicle Register for fire, water, or structural damage.
Common Excess Mistakes and How to Avoid Them
Setting the Excess Too High to Afford
The saving on your premium is real, but it’s only worth taking if you could pay the excess from savings right now. A good rule of thumb based on the figures above: if moving from $500 to $1,500 saves you $200 a year, it takes two and a half years of saving to break even on the extra $1,000 you’d need to find for a claim. If you claim in year one, you’re behind.
Not Knowing About Additional Excesses
Your policy schedule shows the standard excess, but the full list of what can be added sits in the policy wording. Vero’s list of six additional excess types is a good example of how complex it can get. Before you buy, ask the insurer: which additional excesses could apply to me, and what is each one in dollars?
Assuming Not-at-Fault Means No Excess
As noted above, being not at fault doesn’t automatically waive the excess. You need to meet the insurer’s criteria, provide the other driver’s details, and often wait for the insurer to recover costs before you see a refund. Don’t budget on getting it back.
Letting an Unnamed Driver Use the Car
If your policy names drivers and someone else drives, you could face an additional excess or a declined claim. Even policies that cover “any authorised driver” often apply a higher excess for unnamed or young drivers. Check who is permitted to drive before lending your vehicle.
Claiming for Minor Damage Without Checking the Numbers
Your no-claims bonus can be worth up to 65% off your premium after five or more claim-free years. If a repair costs $600 and your excess is $400, you’d only get $200 from the insurer — but making that claim could wipe out years of accumulated discount. Sometimes it’s cheaper to pay for small repairs yourself.
The meter above shows how no-claims bonuses typically build across NZ insurers. Losing that discount for a small claim can cost you far more over the next few years than the claim was worth. Several insurers offer NCB protection as an add-on — it lets you make one or two claims without losing your bonus. For drivers with a large accumulated discount, that can be worth the extra cost.
Key Terms and Takeaways
Frequently Asked Questions
Do I pay an excess on every claim? ▾
Can I get my excess back if I’m not at fault? ▾
What’s the difference between standard and voluntary excess? ▾
Does a higher excess always mean lower premiums? ▾
What happens if an unnamed driver crashes my car? ▾
How do I find out what excesses apply to my policy? ▾
Balancing Savings With Real Affordability
The excess is the one part of your car insurance where you have genuine control over both the premium and your out-of-pocket risk. A higher excess saves you money every year, but it only works if you could actually write that cheque tomorrow. The sweet spot is an excess high enough to meaningfully reduce your premium but low enough that you wouldn’t need to borrow to pay it. That number is different for everyone, and it changes as your savings and circumstances change. Review it at each renewal alongside the premium — don’t just set it once and forget it.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Comprehensive Car Insurance: Is It Worth It in New Zealand?
Sources and Further Reading
Driving Without Insurance in NZ: The Risk You Can’t Afford — What’s at stake if you drive uninsured and how excess fits into the bigger picture.
Essential Guide to Full Coverage Car Insurance for Rental Cars in NZ — How excess works differently when you’re driving a rental.
Consumer Protection NZ (n.d.). Car insurance. 🔗
Insurance Council of New Zealand (2019). Guide to Excesses. 🔗
Quashed (2026). Car Insurance Guide. 🔗
Compare.org.nz (2026). How to Save on Car Insurance. 🔗
Compare.org.nz (2026). Compare Car Insurance. 🔗
Simple Car Insurance (2026). Car Insurance Excess Explained. 🔗
NZ Transport Agency Waka Kotahi (n.d.). Insurance claims. 🔗
Financial Markets Authority (n.d.). Insurance. 🔗
