​Car insurance Terms – The Definitive Glossary for New Zealand Drivers
There are many terms and conditions in a car insurance policy - our guide translates the small print into plain English to help you understand what matters most
Updated 4 June 2023
Car insurance companies always define their terms, but our glossary below explains all the key terms in a language that makes sense:
Car insurance companies always define their terms, but our glossary below explains all the key terms in a language that makes sense:
​Accessory
An accessory is an item that's installed in or on your car but not a standard feature by the manufacturer. An example includes a baby seat. Insurers will often offer cover for accessories up to the repair cost or current value of the item.
​Agreed Value
The agreed value is an amount you're comfortable the car is worth, and you pay a policy to pay out that amount should it be written off. Agreed value can also include the current value for any listed accessories and modifications you have made to the car.
The insurer will allow you to select an agreed value within a specific range, so you can't insure a 2002 Toyota Corolla for $60,000 and get a payout should you have an accident. The insurer will offer a range from $3,000 to $4,500, for example - you decide what you want to insure it for; the higher the value, the more expensive the policy.
The insurer will allow you to select an agreed value within a specific range, so you can't insure a 2002 Toyota Corolla for $60,000 and get a payout should you have an accident. The insurer will offer a range from $3,000 to $4,500, for example - you decide what you want to insure it for; the higher the value, the more expensive the policy.
Annual Mileage
This is how many kilometres you expect to drive in a year. The more you drive, the higher the risk of a claim (statistically). Some insurers ask how often you drive your car (i.e. 1-3 days a week, 4-5 or 6-7, with 6-7 implying higher annual mileage).
Approved or Recommended Repairer
Insurers have a list of repairers they recommend located all over New Zealand. You don't have to use their repairer, but an extra charge may apply if you use another repairer. Many car insurers also guarantee the work of the repairer for life, which is not something usually offered when you use a non-approved or recommended repairer.
Breakdown Cover
Many car insurers offer breakdown cover as an optional extra and an alternative to AA Membership which only covers a driver, not the car itself. Breakdown cover prevents you from sitting on the side of the road if your car breaks down and facing expensive one-off call-out services.
Most insurers charge around $30 to $70 a year for Breakdown Cover to be added to a policy. If your car breaks down, the cover means roadside assistance or a mechanic will attend to your car, try to start your car and, if it's not possible, tow your car to your home.
Most insurers charge around $30 to $70 a year for Breakdown Cover to be added to a policy. If your car breaks down, the cover means roadside assistance or a mechanic will attend to your car, try to start your car and, if it's not possible, tow your car to your home.
Car Insurance Excess
This is the fixed cost you'll pay to make a claim. Our guide to car insurance excess explains how this works in detail.
Car Insurance Policy
A car insurance policy is your document, which outlines the terms and conditions of your contract. A car insurance policy will either be for third party, third party fire and theft or comprehensive.
Claim
A claim is an application to your insurer to fix or replace your car. You will make a claim by phone or by talking to your insurance broker. Your car insurance policy will outline what you can claim for (and what you can't).
Comprehensive Car Insurance
Comprehensive car insurance is the highest level of cover. It insured your car and any other cars and/or property (fences, walls, gardens etc.) damaged in an accident.
Courtesy Car/Rental Vehicle
If your car is being repaired under a claim, some car insurers offer the use of a temporary car, so you're not inconvenienced. This is an add-on benefit, so it won't be included in a standard policy. The idea is that you drive the rental car until your car is repaired. The additional cost of this benefit may not be worth the risk, hence the decision of insurers to make it optional.
Excess
The excess is the amount of money you need to pay to make a claim. How much this will be is detailed on your certificate of insurance and/or in your policy's wording. There are three types of excess:
Standard Excess
This is the insurer's standard policy excess for the type of insurance. In most cases, this will be $400 or $500 for vehicle policies.
Voluntary Excess
Car insurance companies allow you to increase your excess amount in exchange for a reduction in premium. For example, if your excess is $800 ($400 standard and $400 voluntary), you will likely pay the cost of small claims (i.e. panel beating from minor dings) yourself rather than making a claim.
Graduated or Additional Excess
Car insurers increase their standard excesses when a young driver has an incident. For example, the policy may stipulate a $400 excess if an adult is driving but $1,500 if a young person (i.e. under 21-year-old) is driving. The graduated excess is a way of protecting and compensating the insurance company for the higher risk associated with a young driver.
Standard Excess
This is the insurer's standard policy excess for the type of insurance. In most cases, this will be $400 or $500 for vehicle policies.
Voluntary Excess
Car insurance companies allow you to increase your excess amount in exchange for a reduction in premium. For example, if your excess is $800 ($400 standard and $400 voluntary), you will likely pay the cost of small claims (i.e. panel beating from minor dings) yourself rather than making a claim.
Graduated or Additional Excess
Car insurers increase their standard excesses when a young driver has an incident. For example, the policy may stipulate a $400 excess if an adult is driving but $1,500 if a young person (i.e. under 21-year-old) is driving. The graduated excess is a way of protecting and compensating the insurance company for the higher risk associated with a young driver.
Exclusions
Car insurers don't pay out claims for anything and everything - the list of exclusions specify won't they won't pay for. Exclusions are outlined in your policy's terms and conditions.
Market Value of Your Car
The market value is the price your car would sell for if you sold it on the market today. In almost every case, the market value is lower than the price you paid for the car initially. If your car is written off, you'll receive the car's market value, which may be less than you expect. An alternative to market value cover is Agreed Value.
​Modifications or Modified
These are changes or alterations to your car from the manufacturer's standard specifications. Modifications can include adjustments to the steering, tyres, wheels, suspension and engine.
​Natural Disaster Damage
New Zealand is a nation of natural hazards (earthquakes, floods, hail storms etc.). Car insurers cover damage caused by such events.
No Claims Bonus
If you drive for a year without making a car insurance claim, your insurer sees you as a lower risk. To reward you for being a safer driver (and a more profitable customer), many car insurers offer no-claim bonuses, which are is a discount on your policy renewal. The longer you have a policy and don't claim, the larger the no claims bonus could be. Our guide explains no claims bonuses in detail.
Period of Insurance
These are the dates an insurance policy is valid for. They are outlined in your car insurance policy documents. Usually, the period of cover is one month (if you pay monthly) or 12 months (if you pay annually).
Policy Schedule
Your policy schedule is a detailed record of your policy. It details your level of cover, excess and details, additional benefits, your car and personal details.
Premium
This is the cost of your car insurance policy. It's either paid by credit card or direct debit monthly or annually. Many things affect the premium cost, as our car insurance comparison guide outlines.
Third-Party Car Insurance
Third-Party Car Insurance protects you from liability if you cause an accident and/or damage another person's property. This means you won't be chased for payment by someone who suffers a loss directly caused by your actions. Unlike comprehensive car insurance, your car will not be repaired or replaced if you caused the accident.
Third-Party Fire and Theft
Third-Party Fire and theft policies provide additional cover should your vehicle be stolen or damaged/destroyed by fire (unrelated to an accident you cause). Because of the steady number of cars stolen every week, additional coverage beyond standard third party insurance protects you against thieves.
