Even though car insurance isn't mandatory in New Zealand, it is definitely one of those things you should have to protect yourself in case the unexpected happens. When you are involved in an accident, the costs to repair or replace vehicles or property damage and compensation for injuries, can add up quickly.
So, whether you're a first-time car owner, just visiting on an overseas holiday, or you’re looking to review your current coverage, this guide is essential to learn more about the benefits of car insurance in New Zealand. So, avoid learning the hard way, and let’s get started.
Why do I need car insurance?
How often have you seen a car that has gone into the back of someone else, or heard of a car crashing through a fence and ending up inside the living room of a house?
Having car insurance is a smart choice if you own or drive a car. If you are in a car crash and it’s your fault, then you’re responsible to pay for all of the damage caused. This can include repairing or replacing damage to your car, to other cars involved (potentially more expensive ones than yours), and any damage to private or public property.
If you’re not insured, these large and unexpected costs come out of your pocket. You may even find yourself in a tight spot and financially unable to get your car back on the road again, which can be a serious inconvenience to your day-to-day life.
As well as avoiding a large bill, having insurance offers other benefits, such as the insurance company taking care of what happens after the incident. Your insurance company can assess the severity of the damage, organise repairs, and liaise with other people involved or their insurers as necessary. Not only does this save you time and stress, it can also ensure you receive the best possible outcome.
In short, having car insurance gives you peace of mind and protection against financial loss and the stress of sorting out the aftermath, which is especially important when it comes to something as valuable as your vehicle and your sanity.
How does car insurance work?
Car insurance in New Zealand works by providing financial coverage for your vehicle in the event of theft, an accident, or if you require repairs like windscreens, as long as you and your car are legal to drive on New Zealand roads. The specific coverage you're eligible for depends on the type of policy you decide to go with, so it’s helpful to consider all the options available. Some policies even cover extras like towing.
Policy types
Depending on what you need, these are the three most common types of coverage are third-party cover, third-party fire & theft cover, and comprehensive cover.
Third-Party Cover
This is the most basic type of car insurance and would generally cover any damage or injury you may cause to another person or their property while driving. For example, if you accidentally drove into a parked vehicle, or someone’s fence — a third-party policy would mean that you’re not emptying your wallet to cover the cost of any repairs.
Third-Party Fire & Theft Cover
This is the next step up and would include everything in third-party cover, as well as protection for your own vehicle in the event of fire or theft. This is a popular choice for people who want a bit more protection for their own vehicle without the additional cost of comprehensive coverage.
Comprehensive Coverage
This is the most extensive type of car insurance and would generally cover everything included in third-party fire & theft cover, as well as the costs to repair or replace your own vehicle, regardless of fault. This is the best option if you want the most protection for your vehicle because it covers most situations.
There are a number of other insurance policies that maybe worth considering depending on your situation. These include mechanical breakdown if your car is outside warranty, payment protection if you are paying your car off with finance, or guaranteed asset protection — so, depending on your budget, the level of protection you are looking for, you can choose the coverage that suits you best.
Suzuki Insurance is a really good place to start your research, with a wide range of policies including those mentioned above. You should also read the policy wording carefully and follow up with independent financial advice before signing on the dotted line. This will help you understand exactly the cover you are getting including the exclusions, definitions and limits that apply.
What else do I need to know?
You should also note that most insurance policies have an excess. This is the amount you need to pay up front in the event of a claim once you’re approved, before the insurer will cover the rest. You’ll usually have to pay an excess for everything aside from windscreen cover, and this can vary between insurers. Additionally, the higher the risk, the higher the excess which is why your age, or a history of vehicle accidents can affect the amount of excess you have to pay.
Legal liability cover is another major aspect of car insurance. It means the insurer will cover the costs if you're legally at fault for an incident, and there is usually a limit on the amount covered.
Another significant aspect of car insurance to understand is the difference between "agreed value" and "market value". Agreed value means the amount you and the insurer agree the car is worth, which is usually based on the car's purchase price. Market value, on the other hand, is the amount the insurer will pay you based on the current market value of the car, which is often less than the agreed value. You can choose a policy based on agreed or market value.
What if I’m hiring a vehicle?
If you're planning on hiring a vehicle while on holiday in New Zealand, you'll definitely want to make sure you're covered in case of an accident. Thankfully, most car rental companies will offer insurance, with a few different insurers and policy levels to choose from. These options can include Collision Damage Waiver (CDW) and Loss Damage Waiver (LDW), which can cover damage to the rental car, as well as liability coverage in case of an accident — always refer to the terms and conditions of your rental agreement for more details.
When you rent a car, the rental company will usually provide you with insurance options and it's important to understand the differences between them. Usually, the main difference between the options is the excess, which can vary depending on the policy level you choose — higher levels of coverage usually have a lower excess.
Another difference is whether you choose to insure the driver or the vehicle. On a driver-based policy you will have insurance protection in place no matter what vehicle you are driving. If the policy is vehicle-based, anyone who drives your vehicle with your consent is also covered. Excess based on age may still apply.
It's also a good idea to check your own car insurance policy if you are based in New Zealand, as some policies cover rental cars as well. Make sure you’re completely up to speed on the type of coverage you have and the excess before you rent a car, so you can be covered for everything you need, and nothing that you don’t.
What if I’m only on my learner’s licence?
It's crucial that the insurance company is aware if you're only on your learner's licence, because the conditions of your car insurance policy might be different than for a fully licensed driver. The excess is usually higher for less experienced drivers because the risk is higher. However, some insurers have policies specifically tailored to learners and have features, like being able to add a supervisor as a named driver to the policy, which can help to reduce the cost of insurance.
There are usually certain restrictions in place for learner drivers, such as driving with a supervisor at all times, and breaching these restrictions could cause a claim to be denied by the insurer. Be sure to read the policy document carefully and ask the insurer if you have any questions, before you sign on the dotted line
While it's not legally required to have insurance in New Zealand, it's worth considering just for peace of mind alone. Remember that if you're in an accident and you're at fault, then you're responsible for the damage caused. If you're not insured, the costs can be huge, especially if you crashed into a vehicle much more expensive than your own.
Make sure you understand the different types of coverage options and shop around for the right one that best suits your needs and budget.
And if you’re looking for a new car with insurance cover as soon as you drive away, check out our Guide to Buying a New Car today!
