New to car insurance and have no idea where to start? You’re in the right place. In this guide, we break down the basics to help you choose the right type of insurance and coverage, no matter what you’re driving.
What is Car Insurance?
Car insurance is a type of insurance that provides financial protection in case of accidental damage, theft, or third-party liability.
The different types of car insurance
Third-party insurance
When it comes to car insurance, third-party coverage is the most basic type of insurance. This coverage is designed to protect others if you are involved in a car accident, but it doesn’t cover damages to your vehicle.
Unlike some other countries, in New Zealand, there is no legal requirement to have third-party insurance. The Accident Compensation Corporation (ACC) provides no-fault cover for any person injured due to an accident, which is partially funded by a levy paid as part of your motor vehicle registration fee and some of the tax paid each time you fill your car with fuel. However, the ACC scheme does not cover the damage to another person’s vehicle in the event of an accident.
Third-party fire and theft
Third-party fire and theft insurance covers your legal liability in the event that you damage someone else’s car or property, as well as fire and theft of your own vehicle. It could be a good option if you have a limited budget or own a less valuable car, but still want extra protection like theft cover or protection for fire damage, especially if you park in high-theft areas or don’t have secure parking at home or work. However, in the case of an accident, your vehicle isn’t covered.
Comprehensive insurance
Investing in comprehensive car insurance cover is a smart decision. A comprehensive car insurance policy provides extensive coverage against fire and theft and ensures that your vehicle (and any other damaged vehicles) involved in an accident will be repaired or replaced. There may also be other benefits of comprehensive cover such as roadside assistance if your car breaks down, windscreen damage cover for window glass repairs or child car seat protection.
However, it’s essential to research and compare various comprehensive policies and their respective add-ons and benefits to find the best car insurance fit for your needs.
Understanding policy terms
Let’s take a look at some standard terms you’ll come across in a car insurance policy wording:
Premium: The amount you pay, monthly or annually, for your insurance coverage.
Excess: The amount you must pay towards any claim before the insurer pays the rest. Choosing a higher excess can lower your premium, but it also means you’ll have to pay more out of pocket in case of a claim. It’s important to choose an excess that you can afford to pay.
No-claims bonus: A discount offered by insurers for each year you don’t make a claim.
Agreed value: The amount agreed upon by you and the insurer for your car’s value in case of total loss.
Market value of insured car is: The current market value of your car at the time of the claim.
How to choose the right car insurance
When choosing car insurance, here are key factors to consider:
- The type of coverage you’ll need.
- The coverage limits.
- Research the insurer’s reputation — do they have good customer service and claims process?
- Look for policies with additional benefits, like a courtesy car.
It’s a good idea to get a car insurance quote from a number of insurance providers.
How is a car insurance premium decided?
A car insurance premium is the amount you pay for your insurance coverage. Several factors affect your premium, including:
Age: It’s common for younger drivers to pay a higher premium as there is an increased risk of damage.
Car model: High-performance and luxury cars attract higher premiums due to their higher repair costs.
Location: Your location can affect your premium due to crime rates and accident statistics.
Driving record: Have an excellent driving record? You may be eligible for discounts on your premium.
Coverage level: The more extensive the coverage, the higher your premium payments. For example, a comprehensive policy will likely have a higher cost than third-party fire/theft.
Age of the car: Because the car replacement value of an older car is likely less than a new car, the premium for an older car should be less.
What else to consider
As well as understanding the terms of your policy, there are a few other things to think about.
Claim process: Understand the claims process and ensure you have all the necessary information in case of a claim.
Renewal: Know when your policy is up for renewal and ensure you renew it on time to avoid any lapses in coverage.
Modifications: If you modify your car, notify your insurer to ensure they’re covered.
Use our insurance online comparison tool to review insurance policies to find the best cover for your ride today.