If you got into a car accident tomorrow, would you have to pay for the damages out of your own pocket, or would your insurance company cover it? If you don’t yet have car insurance, it’s time to find out what the best car insurance in NZ is for your needs. Compare car insurance options and discover our tips and tricks for choosing the right type for you.
Is Car Insurance Compulsory in NZ?
In New Zealand, it is not compulsory for car owners to have insurance on their vehicles. It is highly recommended that you do so, however, or you will be liable for any damage you cause to other cars when driving.
If you buy a car on finance, you will often be required to sign up for car insurance. This is because when you sign a finance contract, even if you crash the car, you will still have to make the repayments. So, insurance saves you from the potential of totalling and losing your vehicle while still being in debt for it.
Types of Car Insurance
Third-party insurance covers you in case you cause damage to the cars or property of other people. So, if you rear-end someone in traffic, your insurance will pay for the repairs on the other person’s car but not your own.
Many people with older vehicles that aren’t worth a lot choose third-party insurance because the excess would be more than it’s worth to fix their own car. If you total your car, you won’t get any money from the insurance company to help you buy a new one.
Third-Party, Fire, and Theft
Third-party, fire, and theft insurance is the next level up from simple third-party insurance. You gain all the benefits of third-party insurance, plus you will be covered if your car gets stolen or damaged by fire. If you get into an accident, your vehicle will still not be covered.
The best car insurance option in NZ is comprehensive cover. This type includes the cost of any repairs to your car if you’re in an accident, in addition to covering any damage caused to others’ property or vehicles. This is the recommended option when you are buying a car, as you won’t have to pay for repairs yourself if you crash your vehicle.
If your car is so damaged it has to go to the scrapyard, your insurance company will pay out the full value of your vehicle so you can purchase one of a similar standard.
Insurance Excess Explained
You may see the term ‘excess’ mentioned on car insurance sites or on your policy. Excess is the amount of money you need to pay towards any damages before your insurance company will contribute their share.
For example, many policies have an excess of $500. So, if you cause $2500 worth of damage to someone’s car, you’ll have to pay $500 of that, and your insurance provider will pay $2000.
Cost Factors in Car Insurance
Before providing you with a cost for car insurance, insurers first evaluate your situation to decide how risky it is to offer cover to you. They will take into account things like how many car accidents you’ve been in, where you live, your gender, your age, and more.
The more risk you present, the more you’ll pay for car insurance. That’s why young drivers often pay more for insurance than their parents do. Once you’re over 25, the price of car insurance tends to drop significantly.
Tips for Choosing the Best Car Insurance in NZ For Your Needs
Compare Car Insurance Providers
Before you sign up for car insurance, thoroughly compare the car insurance providers you’re considering. Prices and what is covered in the policies vary greatly, so always ask for details on the cost and what it covers.
Comprehensive vs Third Party
Choosing whether you want comprehensive insurance or just third-party will depend mainly on the type of car you drive. Comprehensive insurance covers more, but it’s far more expensive than third-party. People with cars worth $5,000 and over are more likely to choose the comprehensive cover as it would be harder to pay the cost of replacing their vehicle themselves.
Re-Evaluate to Account for Depreciation
Cars rapidly drop in value as soon as you drive them off the lot. So, you may insure your vehicle for $15,000 this year, but by the same time next year, it could be worth $10,000 or less. You pay more in insurance for cars that are worth more, so remember to go back and update the value of your vehicle each year with your insurance provider. This will prevent you from overpaying.
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