Car Insurance: The Definitive Guide

Updated 15 November 2018

Summary of Car Insurance

Policy costs vary widely - for the two vehicles we sampled, we found Trade Me Insurance (underwritten by Tower) to be the best overall value at an average of 30% below the market average, despite charging $100 more for excess on a claim.
In every instance, what you pay for vehicle insurance will vary by model and driver specs - those who spend 10-15 minutes pricing all the insurers online can most likely find a deal among the providers.
Comprehensive car insurance is almost always more expensive than third party, and is a popular choice for a vehicle worth more than $2,000. However, Comprehensive is generally a good choice if you can’t afford to repair or replace your car yourself.
Our research proves that where you live is a major factor in what you'll pay - policies for the same car in Auckland can cost twice as much for those in the regions
If you live in an area known for bendy roads you might pay even more - it's essential to shop around as some insurers don't discriminate and their quotes will save you money.
Many Kiwis over-insure their car when it comes to 'market value' in the event of a claim the insurance company will write off the car if the cost of repairs are more than the current market value of the vehicle as determined by the insurance company. For example those holding policies stating a $10,000 estimated 'market value' may only receive $6,000 if the car is written off.
'Agreed value' as a payout is an alternative popular option whereby you and the insurance company agree in the policy the amount to be paid out if the car is written off.
Young driver insurance continues to be expensive as insurers perceive newly qualified drivers as the highest risk
Paying for car insurance annually instead of monthly is always cheaper, sometimes by as much as 15%
If you sell your car and have prepaid insurance for 12 months, it's one phone call to your insurer to get a refund for the days of cover you don't use.
Claiming is an easy process, but hundreds of people lodge complaints every year about their claim being declined. To reduce the chance of this happening, it's essential to read and understand your policy as to what you are covered for, and for what you are not covered for.

Our Guide to Car Insurance
The cost of insuring a car in New Zealand continues to climb well above inflation. In this guide, we explain the basic principles of car insurance and outline several tips to keep your policy cost down year after year. New Zealand does not require car owners to have car insurance by law – our view is that not having at least third party car cover is a risk that could severely affect you financially if you cause an accident.

Our Guide: Overview

What is Car Insurance?
There are two types of car insurance, 'Comprehensive insurance' and 'Third party insurance'.

Comprehensive car insurance specifically covers you if your car is stolen or damaged in an accident. It also pays out to other people if your car damages their vehicle or property.
Third party car insurance only pays out to others, but does not cover your own car. This means if your car is stolen or involved in an accident, anyone affected other than you will be covered.

What influences the cost of Car Insurance?
Car insurers take into account a lot of data to decide what price to offer, including:

Your age
Your gender
Your car accident history
Your location
Your car model and year
Where your car will be stored
Whether your car will be used for work purposes, or for personal

High Risk, Higher Price
The riskier you are to an insurer, the higher the cost of your car insurance premium. If you are a middle-aged woman with no accident history driving a Toyota run-around to and from work in Dunedin, you’ll pay less than a newly licenced 'boy racer' with a modified Mitsubishi in Auckland. If you can prove you are low risk by being accident free and having secure parking for your car, you will save more.

Car Insurance - Explaining the Terms

Understanding terms like 'excess', 'third party' and 'comprehensive' is essential for navigating car insurance as we explain below.

Insurance Excesses Explained

An insurance excess is a fixed dollar amount you will pay if you make a claim. For example if your excess is $400 and your claim for an accident is $1,000, you will pay $400 and your insurer will pay $600. When deciding on a policy, it’s a rule that the bigger the excess, the cheaper the cost. But if you will really feel the pinch of a $500 excess, it may be worthwhile considering a lower excess. This will ensure any claim can be quickly processed while avoiding another stress of getting money to cover the excess.

'Third party', 'Third party, fire and theft' and 'Comprehensive' Car Insurance explained

It’s really important to know the difference between each type of car insurance so you only buy exactly what you need.

1. Third party
Third party is usually the cheapest car insurance option and is limited to protecting everyone you share the road with (other cars and property like fences, walls and houses walls) from you if you cause an accident while driving. Third party insurance pays out for anyone affected by your accident, but not your own car or any damage done to your own property. For example, if you hit your own house with your car, you’re not covered. Third party is most suitable for anyone with a low-value car (less than $2,000 market value) who can afford to repair or replace it quickly in the case of an accident.

2. Third party, fire and theft
Third party, fire and theft car insurance is similar to third party insurance but extends to cover your car if it catches fire or is stolen. If your car isn’t worth much and you believe you’re a safe driver but don’t want the inconvenience and expense of buying a new car if it gets stolen, this cover may be more suitable than third party of comprehensive.

3. Comprehensive
Comprehensive car insurance offers the most cover, specifically damage to your car, other cars and any property from accidental damage, certain car faults and in some cases windscreen issues.

'No-claims bonuses' explained

A no-claims bonus is a discount you can receive on your insurance premium if you don’t make a claim.

You are only eligible for a no-claims bonus if you stick with the same insurer year after year as you’ll build a history with them. Some insurers have introduced 'Lifetime No-Claims Bonuses' which can offer up to 65% premium discount if you don’t make a claim in your first year. If you make a claim, you’ll lose your discount in the following year and will need to build up a claim-free history to qualify for a no-claims bonus again.

Generally, you will receive a no claims bonus if you have not had any claims or if you were involved in an accident, you identified the party at fault (i.e. name, address, phone number, make, model, registered number of that other party’s vehicle), and could prove that the other party was more than 50% at fault.

Some insurers, such as AAI, no longer offer no claims bonuses, instead choosing to automatically qualify customers for discounts rather than asking additional questions.

Applying for a Quote and the need for Full Disclosure

Car insurance and lies mix like oil and marine life. If you get caught out, they’ll sink you. Our position is simple - be completely honest when applying for insurance. Don’t alter facts when it comes to driving habits, location and accident history. Don’t be tempted to give another address to save money (i.e. the North Shore is cheaper than Piha) or to forget to mention an accident you caused but didn’t claim on with another insurer. It’s not worth the risk.

For example, when an insurer asks "in the last 3 years how many vehicle-related incidents have you had?” don’t answer none if you did have an accident even if it wasn't your fault. If you later cause an accident and the cause is traced back to a fault in your car from the first accident, your insurer may refuse cover.

Now that we’ve outlined the facts of car insurance, our 20 tips to cut car insurance costs is packed with easy to-do steps which could save you hundreds of dollars every year.

20 Simple Tips for Cutting your Car Insurance Costs

Car insurance can be considerably cheaper if you shop around but make sure you insure for the right amount. We have listed a few ways to price bust your premium and get full protection at the same time.

Your address is a major factor in how much you’ll pay

A significant factor in your car insurance quote comes down to where you live. In areas of New Zealand which are relatively 'car free' you’ll pay less. Live in an area with a twisty road and you’ll pay more.
In our research, we found the cheapest car insurance is available in relatively less populated places like Invercargill, Gore and New Plymouth, whereas residents in Piha and Mangere pay the most.
There’s nothing you can do to change that – lying and saying your address is in Invercargill when you are based in Wellington is a big no-no.

Don’t OVER insure your car when it comes to market value

Hundreds of thousands of drivers overpay on their insurance unaware that if they make a claim they won’t be paid the insured market value. Let’s explain with an example:

Steve insurers his 2011 Toyota Corolla for $12,000, it’s market value in 2018. Over the next ten years, the value of the Corolla falls gradually to $2,500 by 2028.
However, Steve continues to pay insurance on a value of the car being $12,000. If he has an accident, the insurer will only pay the current market value not the $12,000 market value he originally insured it for.
For this reason, you could expect (with all other things being equal) your car insurance policy to drop in price every year as your car becomes less valuable. Unfortunately this isn't the case.
When it comes to obtaining or renewing your insurance, a good approach is to get quotes from at least three other insurers for your car using our rapid quote approach of online quotes.
Call your preferred insurer, tell them about the quotes from insurers (if they are cheaper) and ask them to match it.

Third-party is almost always cheaper than comprehensive policies

The general rule is that in almost all cases, the same driver with the same vehicle will pay less for third party cover compared to comprehensive cover. This is because the insurer doesn't have to pay to repair or replace your car if you cause an accident.

In general, third-party policies are most suitable for anyone who:

Owns a car worth less than $2,000
Is aged under 25

Comprehensive policies are a more suitable if your car is worth over $2,000. However, as mentioned above, Comprehensive is generally a good choice if you can’t afford to repair or replace your car yourself

As one reader writes:

I caused a minor accident on the southern motorway when I pranged another car. I had third party insurance so it took care of the other car easily enough, but I was faced with writing off my own car as the repairs weren't going to be cost effective. I lost about $7,000 in 10 seconds. I've since replaced my car and taken out a comprehensive policy as the difference in price for me is about $400 for a similar car to my old one and that price is after declaring my involvement in an accident, meaning I probably pay more than the average accident-free person. - Alice, Auckland

The better your driving history, the lower the premium

If you’ve had a few accidents and have been at fault, you’ll need to declare this to you insurer. The cleaner your driving history the lower your premiums will be. It's as simple as that - do not neglect to mention any accident as insurers can challenge any claim if they believe you lied on your original car insurance application.

List ALL drivers under 25 to protect yourself on excesses

Some insurers specifically charge a higher excess if a person under 25 who isn’t on your insurance is involved in an accident. Protect yourself by naming everyone you can expect who is under 25, and keep in mind that if a young driver wishes to borrow the car your excess may be higher. Check your policy to be sure what the cost will be.

Some insurers also charge an 'inexperienced driver excess' above your standard excess. This applies when a driver over 25 years of age who has held a New Zealand driving licence for less than a set number of years. It doesn’t matter if they’re listed or not listed, the excess will still apply.

Ignore the myths - your name, race or job description do NOT affect your quote

Other countries use some of these factors to deliver quotes, but for now this is not the case in New Zealand. Any broker, colleague or ‘expert’ who tells you otherwise is incorrect. It is rare that insurers even ask for any of these details when providing a quote.

A 'modified' car may not be fully covered

If your car has had work done, the modifications may not be covered. Many insurers won’t cover your car for specialist work such as engine modifications, after-market petrol turbo charging, gearbox upgrades and door modifications. If you have 'pimped' your ride, you may need to seek specialist car insurance that covers what you’ve done. You'll be asked at the quote stage about the status and extent of your modifications.

Paying Monthly vs Paying Annually

If you select to pay monthly, you’ll be not only paying more but you’re likely to see it lodged on your credit report. Any late payment could adversely affect your credit score. We found vehicle owners could save around 15% if they paid a year in advance.

Refrain from Auto-renewing – shop around and ask for a better deal

Car insurers love to attract new customers with low prices. Renewing at $900/year? You may be able to get a new policy with the same company for $600. Insurers more often than not increase the price every year knowing with confidence in knowing that most customers don’t switch, despite the value of your car decreasing.

But it's important to note that what you will pay in future years depends on statistics of claims for the year before, and whether you’ve made a claim as well. Some insurers also have loyalty discounts to ensure that premiums don’t increase or aren’t more than an equivalent new customer’s policy.

Getting the best renewal premium
We suggest making a note of your renewal date and spend 10 minutes getting some quotes for new policies with other insurers. You may find something much better, and if so you can call your existing insurer and ask them to match it. They won’t want to lose you, so should be able to negotiate.

Don’t buy add-on extras if you don’t need them

Insurers like to make extra money from extra services, many of which can be overpriced for what they deliver depending on your road history. Examples include windscreen protection and breakdown cover. The cost of each 'extra' can be up to $100 each per year, so evaluate what you really need and what you can do without.

A MoneyHub reader writes:

Windscreen protection is very useful and is included in my policy without being an extra. Over the years I have had quite a few claims for damaged windscreens usually caused by loose stones. There has never been any hassle in getting the repairs done promptly and there is no change to no claims bonuses. We have also changed from AA roadside assistance to State Roadside Rescue costing $30 per year because this covers the car where as the former only applies if the driver is an AA member - John, Auckland

Using a car for 'work purposes' will bump the price of your quote by around 50%

If you’re using your vehicle for your job, you’ll pay a higher premium for the main reason you’ll be using your car more than a standard driver. But if you commute to and from work, as most drivers do, that doesn’t count as 'business'.

And if you are using your car for Uber, even part time, your standard car insurance is probably invalid.

Pick the right excess to balance value with protection

Ask yourself, what could I afford to pay for my car to be repaired? That should be your excess. For example, if you pick an excess of $1000 and would struggle to come up with that money overnight, then it’s better to lower the excess. The lower the excess, the higher the premium, but it’s not significant. As part of our research, we saw that dropping the excess from $1000 to $500 increased a number of premiums between ~$50 and ~$100 per year.

Selling your car? You can get a refund on any months you’ve prepaid

When you sell a car, you will no longer need insurance. Don’t think that the money your paid for your insurance is wasted – call your insurer, inform them of the sale and request a refund for the months you’ve already paid for. They will be able to process it on the same day and you should have your money back within 5 business days at the latest.

If your car has finance owing on it, you will have to take out a fully comprehensive policy

It's not a legal requirement, but a lender will in almost all cases require fully comprehensive insurance. After all, if you have an accident, they will want their investment protected by insurance. Ask your lender if you can pick your own insurance rather than use their 'recommended' policy which may not be the best deal - our best buys are a good starting point.

Consider getting a multi-insurance package to save up to 35%

Most insurers get excited if you use them for all of your insurance needs, i.e. home, life and/or car. And they will offer decent discounts to incentivise you to pick them. A popular way to get the best cover at the lowest price is look at our best buys within car insurance, home insurance and life insurance, contact 2-3 insurers and haggle for a price reduction. You have nothing to lose and only money to save by doing this.

Understand 'Agreed Value' and 'Market Value'

How you decide to insure the value of your car will either be 'agreed value' or 'market value'.

Many policies give the option to insure vehicles for 'agreed value' - this is a specific dollar amount and if the vehicle is damaged beyond economic or safe repair, or if the vehicle is stolen and not found, the insurer will pay the agreed value. 'Agreed value' policies give the security of paying you the agreed value for your car should it be written off - this 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 certain 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.

We incorporate guidelines from the Finance and Insurance Ombudsman below when it comes to agreed value and market value policy costs:

Your agreed value should decrease at every renewal of the policy to reflect the vehicle’s reduced value after another year. Some insurers automatically do this, but many do not and as a result customers pay a higher premium if they do not adjust, while others leave it to the insured to make the change. The agreed value at each renewal should realistically reflect the market value of the vehicle.
Your market value means that, if the vehicle is damaged beyond economic or safe repair, or if the vehicle is stolen and not recovered, the insurer will pay the pre-accident market value of the vehicle or the sum insured, whichever is the lesser. Determining the market value follows a set process - the insurer will know the value of the vehicle immediately before the loss or damage and take into accounts its age and condition.

Reducing the risk of a lower-than-expected payout following an accident

In determining market value, an insurer will usually obtain two independent valuations from specialist vehicle valuers.
You may not agree with these quotes as they may seem too low. If this is the case, it is recommended to get your own valuation from a professional vehicle valuer who is under an obligation to consider it.
There will also be a post-accident inspection of the odometer and general condition if the vehicle is able to be located (i.e. not stolen).
Every day, New Zealanders incorrectly assume they will receive the amount the vehicle was worth (or insured for) when they first arranged the insurance, regardless of the vehicle’s actual market value at the time of the incident giving rise to the claim.
As the owner of the car, you are in the best position to establish the vehicle’s market value at any given time and should take responsibility for doing so, prior to each annual renewal of the insurance on the vehicle to avoid being under insured if an accident happens.

NOT having car insurance is a big risk

Unlike other countries, it is perfectly legal to drive a car in New Zealand without insurance. But if you cause an accident and damage another vehicle or property, you are personally liable. You may not have much in the way in savings, but anyone (or any insurer) who is a victim of your actions can take you to court. For example, if you hit a new BMW causing $50,000 of damage, it is perfectly reasonable to be ordered to repay the loss at $50 a week, which would take 20 years!

With third party insurance available at around $150 per year, it is a sensible choice to protect yourself and the general public.

Does the car have an approved alarm or immobiliser?

If so, you could save on your policy - many insurers ask you to confirm if your car has some form of alarm - tick yes if this applies.

Have a garage? You'll save more on your policy cost

Insurers favour car owners who have locked garage - the risk of theft is greatly reduced and your car is also better protected from the elements. When getting quotes, tick the garage box if it applies and you'll get a lower quote.

Read your policy in detail and ask if you don't understand something

It's vital to double-check the terms and conditions of your policy to reduce the risk you get burned thinking you are covered for something you are not. Before proceeding to purchase a policy:

Double check the quote - it's worth entering in your details once more to make sure you haven't missed anything.
Read over the policy's coverage - and if you have any questions, call the insurer to clarify. If you want perks like a free replacement car then check to see if it's included. Don't 'hope' it is covered - find out. Look at the excess cost and consider adjusting it based on what you can afford to reach the right point between value and risk.

Car Insurance – Best Buys to Save You Money

Right now, New Zealand doesn’t have car insurance comparison sites. This is because car insurance is not like home or health insurance quoting – there are many factors involved in determining a quote and the technology isn’t there yet. To make this easier for New Zealand drivers, we’ve bridged the gap and added some content but every vehicle and driver is different - we believe MoneyHub offers the most comprehensive price information currently available.

Every driver has different circumstances, so we have not exhaustively tested a range of cars, drivers and location profiles. Instead, we have compiled the quotes and policy information to raise awareness of the difference in prices and why it's essential to shop around and avoid auto-renewing without challenging the price first.

Car Insurance - How Where You Live Drives the What You Pay

We asked for quotes for a 2011 Toyota Corolla and 2017 Toyota RAV 4 among all the insurers for locations all over New Zealand. From flat wide road Invercargill to the sharp corners of Piha, we asked for agreed-value quotes for towns and cities all over the country.

Our results in summary:

Trade Me Insurance offered the best value policies if the vehicle owner is a Trade Me member (15% discount), while AA Insurance was the most expensive insurer for the samples we made - please note that every vehicle and driver is different, so this is not an indication of the market in general.
Excess was usually $400 and only Trade Me Insurance charged more ($500) - if you have a history of more than one claim per year, Trade Me will incur the highest excess fees.
Policies did vary for small things like replacement car and glass damage, download our PDF comparison for more details
Invercargill and New Plymouth were the cheapest locations for insurance, with Auckland being the most expensive for the online quotes we obtained.

Our thoughts
1. It's easy to save a lot - we believe vehicle owners could save up to $400 by shopping around for a better policy AND paying annually - this is based on the differences in policy prices we found in for quotes with the same vehicle and driver details.
2. It is easy to get quotes - you'll need the following details and about 10-15 minutes to compare using the major insurers' websites.

Vehicle licence and/or model/make/year
Age of driver, licence and when licence was obtained
Where the car is stored (garage, driveway, road etc)
Distance driven per year
Private use or business use
Accidents and claims history
Preferred insured value of vehicle

BEST BUY 1
Vehicle: 2011 Toyota Corolla, no car alarm, parked off street but not in a garage
Cover: Fully comprehensive
Car insurance quotes for a 35 yo male drive, no accident history and holding a full licence since 2004

Drives approx 6,000 KM/year
Private use
Primary driver holds a full licence
Primary driver is a 35yo male
Comprehensive insurance quoted
$12,000 insured value
Download our table in PDF format

BEST BUY 2
Vehicle: 2017 Toyota RAV4, no car alarm, parked off street but not in a garage
Cover: Fully comprehensive
Car insurance quotes for a 35 yo male drive, no accident history and holding a full licence since 2004

Drives approx 6,000 KM/year
Private use
Primary driver holds a full licence
Primary driver is a 35yo male
Comprehensive insurance quoted
$30,000 insured value - (AA Insurance is the only insurer who would not allow an agreed value of $30,000, mandating $35,000 as the minimum)
Download our table in PDF format

Making a Claim – Protect Yourself and Get a Faster Pay-Out

1. Get the important details you need to make a claim
If you are claiming for any type of traffic accident, there are six essential details you will need from the other driver:

Name
Address
Vehicle registration number
Telephone number
Names of any passengers
Insurance details

It's also helpful to take photos of the accident if you can, even if it's dark, as long as it is safe to do so.

2. Call your insurer
Phone your car insurer immediately after getting the above details confirmed - the longer you wait, the less helpful it is to the insurer's claim process. You will also need to explain the accident in detail, informing them of:

The location of accident - road names etc
Weather conditions - i.e. Sun, rain, snow, ice or fog
Light conditions - i.e. Daylight, dawn, dusk or dark
Road conditions - i.e. wet, dry, ice or oil on road
A full description of accident - in detail, including the speeds of all vehicles, any obstructions (i.e. parked cars) and/or bends in the road.

3. The Claims process
Many insurers will assign you a claim/customer manager when you first call them about the incident. The claim manager is one person who will handle your claim from your first call to payment. In some cases you may have to complete a claim form in writing, but this is happening less and less.

Even if you don't think you will claim on your insurance for an accident (i.e. in cases where the damage is minimal), you should still notify your insurer.

4. Do I have to contact my insurer?
Car insurers expect to be notified of any incident that could potentially lead to a claim - even if you don't plan to make one. Not doing so may violate your car insurance policy's terms and conditions as you are not disclosing a 'vehicle-related incident'. Insurers rely on full disclosure of vehicle-related incidents when calculating the cost of your policy when you renew your car insurance. Furthermore, there is a risk that an accident damages your car, affecting its safety and/or value.

5. Should I make a car insurance claim or pay for the repairs myself?
This depends on the scale of damage and whether or not you want to pay for the repairs yourself. It's perfectly normal to think twice about making a claim if you think your premium will increase next time you renew. Before you make a decision, contact your insurer - most insurers are able to tell you how much your premium will increase by or give you an average amount. Minor issues like chipped windscreens or an uninsured driver backing in to you won't spike your premium like causing a serious collision would.

Whatever you decide, be vigilant around renewal time - if your insurer quotes a higher price, consider switching insurers and/or asking your current provider for a better price.

6 reasons why car insurance claims get declined

The Insurance and Financial Services Ombudsman (IFSO) receives hundreds of complaints from dissatisfied car insurance policy holders who have had a claim declined. To reduce the chance of this happening to you, it's essential to read and understand your policy. Also, the IFSO confirms that non-disclosure continues to be an ongoing issue for consumers and a frequent reason why claims are not met. It is essential consumers tell insurers absolutely everything when arranging any insurance and at annual renewal.

1. You didn't take enough care
If you leave your car unlocked and it gets stolen, you have failed to take 'reasonable care' and a claim for theft will be declined.

2. Your car was unsafe
If your car doesn't have a WOF and you cause an accident which was caused by a defect in your car (i.e. dodgy brakes), your insurer is unlikely to pay out.

3. You were drinking
Insurers are very sensitive to alcohol, and will outright decline claims if you were under the influence of alcohol. If you had a drink before an accident, you must disclose everything so they have all the facts. A glass of wine two hours before an accident is unlikely going to be put you 'under the influence'.

4. You did not comply with the conditions of the driver’s licence
For example, if you are on a learners or restricted licence and have unlicensed passengers in the car, any claim will be refused. The same goes for any unlicenced driver.

5. You have private-use car insurance but you use the vehicle for business purposes
This is a big no-no and a common reason for insurance claims to be refused. If you start moonlighting for Uber, your existing person insurance will not cover you.

6. You failed to mention something important - such as a previous accident, criminal conviction or licence disqualification
These factors may cause your policy to cost more, but they're essential for your insurer to know.

Your Rights if Your Claim is Rejected

If you believe you have a genuine claim that your insurer refuses to pay out, re-read the terms and conditions of your policy again and cross-check it to the reason(s) your insurer has given for denying the claim. If you have been rejected and you think it's unfair, appeal it by doing the following:

Jump on the phone and explain why your claim meets the T&Cs of the policy you bought.
If they don't agree, you can lodge a complaint with the Insurance & Financial Services Ombudsman Scheme which resolves disagreements between customers and their insurers.
Their free-of-charge service will make the final decision about your claim and order the insurer to pay out if they find in your favour.
If your insurer isn't a member, you can complain to Financial Services Complaint Ltd who follow a similar process.