Do You Need Car Insurance In NZ?

Some people ask - Do I really need car insurance? The short answer is - yes! Unfortunately, the reality is accidents happen, no matter how careful a driver you are. The costs associated with damage to your vehicle, someone else’s vehicle or property the costs can quickly mount up. Skimping on insurance is like taking an unnecessary gamble with potentially quite devastating financial consequences. So if you think of car insurance as your financial safety net - then it becomes clear you do need insurance!

Types Of Car Insurance In NZ

More than just ticking a box, car insurance can significantly affect the long-term costs of owning a vehicle. In NZ, we have 3 basic types of car insurance options so you can pick the right one to suit your needs.

• Third-Party Insurance. The most basic level of coverage, third-party car insurance covers costs for the vehicle you damaged, but does not cover repairs to your own vehicle. This option is often favoured by people whose own car is not worth much or when the budget is tight.
• Third-Party, Fire, And Theft. A small step up from the basic coverage of third-party insurance, this one offers a bit more protection with additional cover for fire damage and theft. This option is a solid middle ground if you want more than basic third-party coverage.
• Comprehensive Insurance. Aimed at those requiring full protection, comprehensive insurance covers damage to both your car and others, as well as theft, fire, and sometimes vandalism (individual contracts will vary). Generally, you will decide upon an ‘Agreed Value’ or ‘Market Value’ amount for the insurance cover (for the cost of replacing your vehicle). This option offers peace of mind and is ideal for higher-value cars and those who cannot absorb the cost of being without a vehicle for long.
• Optional Extras. In addition to these insurance cover options, there are optional extras you can add-on to your cover (depending on your insurance provider). These include:
  • Increased/Decreased Excess. There is usually an option to pay a slightly higher premium which will reduce the amount of excess you need to pay when making a claim. Alternatively, paying less premiums will equal a higher excess amount.
  • No Claims Bonus. Most insurance companies will offer various discounts including if you haven’t claimed on your insurance for certain periods of time, and multiple product discounts (car, home and contents etc.)
  • Windscreen Cover. Free windscreen replacement coverage is available for the insurance period.
  • Rental Car Cover. Rental car allowances are paid to cover the cost of having to temporarily rent a car if your car is out of action or written off.

How Does Car Insurance Work?

Car insurance policies are an agreement made between you and an insurance provider. The contract states you will pay a total annual premium (the amount you pay weekly/fortnightly/monthly or yearly for your insurance cover) and an additional excess (the contribution you pay when you make a claim) if you make a claim, with the understanding that insurance provider pays for any damage incurred up to the limit of your policy.

If you are in an accident, always request the name and contact details of those involved, and get the vehicle registration number and driver’s licence details (if possible). Contact your insurance company as soon as possible after the incident. Or if your car has been stolen, contact the police (your insurance company will want a copy of the police report).

Having made a claim and paid the excess, your insurance provider pays the remaining costs to repair or replace your car, and any damages to the other person’s car or property. If you agree to pay a higher excess, this will lower your premium, if you agree to pay a lower excess your premiums will be higher. An important part of deciding on your insurance cover is making sure you can pay the excess!

When you purchase car insurance, you generally will likely have two options - settling on an Agreed Value or a Market Value. This is the amount that will be paid out if your car is written off, or stolen etc. Keep in mind any outstanding premiums or on-road costs, and your excess will be deducted first.

• Agreed Value. A set amount is decided on when purchasing your insurance, this will be the maximum amount that your insurer will pay for your vehicle. Make sure the agreed value is enough to buy a vehicle with similar specifications.
• Market Value. The market value refers to the “reasonable retail value of your asset immediately before it was lost or damaged”. This figure is usually set by an independent registered valuer and is determined by the condition of the vehicle, its make, model, age, mileage, and the damage incurred.

If you make a claim and your car is written off, you will generally receive your agreed settlement amount. Keep in mind, you will likely have to pay the total premium for the entire period of insurance before the claim is settled. If your car is repairable, the insurance company will pay for the repairs, or in some cases, you might receive the value of repairs (minus the excess, of course).

Top 3 Benefits Of Having Car Insurance

1. Protection. Car insurance offers you financial protection against vehicle damage or loss. Depending on the level of cover you choose, you are less vulnerable to the financial stress of having to replace your vehicle after an accident or having to pay for repairs for someone else’s vehicle (if you are at fault).
2. Convenience. If you find yourself in an accident, you will be able to get mobile again much faster thanks to the insurance company. Depending on your policy, you may be entitled to rental car subsidies or fairly instant pay outs so you can buy another car much more quickly and get back out on the road.
3. Communication. Been in an accident? Don’t worry, your insurance company will deal with all the paperwork. This includes communicating with the other insurers, assessors, repairers and drivers involved in your accident.

What To Consider When Choosing Insurance

First up and most importantly - don’t just grab the cheapest quote you can find. You will need to think about carefully, plus add the following to the list to consider before getting insurance.

• The Level Of Cover. Are you opting for third-party only (covering damage to other people’s property), third-party fire and theft, or comprehensive (covering damage to your own vehicle as well)? The more comprehensive the cover, the higher the premium, but the greater the protection.
• The Excess. This is the amount you’ll have to pay out if you make a claim. A higher excess usually means a lower premium, but ensure you can comfortably afford that amount if needed.
• Optional Extras. Some policies offer extras like windscreen cover, roadside assistance, or courtesy car options. Consider if these are valuable to you and factor them into your budget.
• You Have Options. Shop around! Insurance premiums can vary significantly between providers, always get quotes from multiple companies to ensure you’re getting the best value, and don’t be afraid to negotiate a bit or ask about potential discounts.

Do You Legally Need Car Insurance In NZ?

It may surprise you to know that vehicle insurance is not actually compulsory in New Zealand. Unlike other countries such as Australia, the UK, and America, New Zealanders do not legally have to have any insurance cover to drive their car on NZ roads.

However, you will find the majority of car owners have a minimum of third-party insurance to avoid having to personally pay the cost of damage to someone else’s vehicle. Third Party is generally seen as a minimum for most.

If you are seeking car finance to fund the purchase of your vehicle, you will almost certainly be required to get insurance. Comprehensive car insurance is usually listed as a condition of the loan agreement. This provides a level of protection for both the car owner and the finance company.

What Happens If You Crash Without Insurance In NZ?

If your car gets stolen or you crash into someone (or their property) and you don’t have insurance you will have to pay for the total amount of the repair costs for both you and the other person (if you caused the accident). If you are involved in an accident and not at fault, it is likely that the other person’s insurance will cover the cost of your repairs (if they have insurance).

How Much Is The Average Car Insurance In NZ?

Car insurance costs in New Zealand do vary by location. Generally speaking, for comprehensive car insurance, Auckland car owners might expect to pay around $1,600 per year on average. In comparison, Wellington and Canterbury drivers might pay about $1200 per year. Of course, these figures will vary depending on a number of factors, including:

• Drivers Age. Drivers under 25 tend to encounter higher premiums due to the perceived increased risk.
• Driving History. If you have had any recent accident/s or traffic offences this will affect your premiums.
• Licensing. For example, learner, restricted or full and the length of time they are held.  
• Claims History. How many claims you have made over the years (even if an accident wasn’t your fault).
• Type Of Vehicle. The make and model of the vehicle significantly impact insurance costs.
• Value. Higher-value vehicles cost more to repair or replace, leading to higher premiums.
• Performance Enhancements. Sportier cars or those with powerful engines or engine enhancements generally mean higher premiums.
• Safety Features. Cars equipped with added safety features like anti-lock braking systems (ABS), airbags, electronic stability control (ESC), and high safety ratings may sometimes qualify for lower premiums.
• Security Features. Cars with built-in alarms, immobilisers, and tracking devices generally qualify for lower premiums.
• Theft Frequency. Cars that are frequently targeted by thieves will likely have higher insurance costs.
• Engine Size. Bigger vehicles with more powerful engines can expect higher premiums.
• Vehicle Usage. What you use your car for (e.g., private use, commuting, business use) affects the risk profile and therefore the premiums.
• Address. Where you live will determine location-based premiums. As does where the car is parked overnight, locked garage versus on the street.

Overall, it is important to carefully review all car insurance options, shop around from different insurance providers and choose the option that best suits your needs. Remember to always look closely at what’s covered and what’s not, so you can make an informed choice and avoid any nasty surprises down the track. Looking at buying a new car? Take a look at our step-by-step guide to buying a used car here.

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_{Disclaimer: Please note that the information provided in this blog post is for general informational purposes only and does not constitute financial or insurance advice. Car insurance policies and regulations can vary. Always consult with a qualified insurance professional for personalised advice tailored to your specific circumstances and location in New Zealand.}

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