So far in our Car Choices series we’ve covered what to buy (new or used), how to buy (own or lease) and which fuel is best for you (petrol or diesel).
And so you’ve just purchased that car, SUV or ute. There’s something you need to attend to before you even think about driving it away from the dealership: insurance.
Car insurance is not compulsory in New Zealand, but we’d argue it’s absurd to consider driving without it. Okay, you might have bought a banger that’s only worth a few hundred dollars, so you aren’t that worried about damage or theft. But that doesn’t matter when you have an at-fault accident with somebody’s $200,000 luxury car that you are suddenly liable for.
Read More: Should you buy new, used... or 'nused'?
And if there’s any kind of finance on the vehicle, it’s unlikely it’ll be allowed to leave the seller without proof of insurance.
Types of car insurance
Policies vary between providers, but there are three basic types to consider.
“Comprehensive” does what it says on the box: covers damage to your vehicle, plus damage you might cause to other cars or property if you have an accident that’s deemed to be your fault.
“Third party, fire and theft” covers your vehicle if it’s damaged by something outside your control – if it’s stolen, for example. It also covers damage you might cause to other people’s vehicles or property, but it won’t cover your own car in an at-fault accident.
“Third party” simply covers damage to other cars or property you might cause in an accident, but your own vehicle is not included.
Naturally, prices drop with the level of cover. But don’t assume it’s not worth getting comprehensive insurance on an inexpensive car: the difference may not be that great.
How to shop
Firstly, it pays to shop around. The price of motor vehicle insurance varies wildly between companies, depending on the vehicle and your personal circumstances. The same information provided to different providers will often yield dramatically different policy prices.
There are a multitude of insurance providers in NZ and of course you can pick up the phone and start calling them. But all the major names offer online tools that allow you to get a quote and even sign up right there and then.
An hour or so invested in research could save a lot of money and it’s done all from a laptop.
Things to consider
When you’re policy shopping you’ll be asked a lot of questions: where you live, where you’ll keep the car (on the road or in a garage), who will drive it (perhaps even how often they’ll drive it), and so on.
Don’t be tempted to stretch the truth to bring the policy price down. Because it’s futile to pay for insurance, only to find your claim is denied when the worst happens, because you weren’t honest about the circumstances of your ownership in the first place.
This is particularly relevant for young drivers, who are usually very expensive to insure. Providers are very wise to the classic ploy of parent insuring a child’s car in their name to keep insurance cost down – or saying an under-25 is not a “main driver” when in fact they use the car regularly. The truth usually becomes clear when an accident happens and you have to make a claim; it’s really not worth the risk.
You’ll need to think about how much “excess” you want to pay (you usually get to choose). Excess is the amount of any claim you have to pay yourself – and many companies have a sliding scale to lower the excess for a higher premium, and vice-versa – lower risk/more experienced drivers are best to use the lower premium/higher excess ratio.
Most providers allow you to pay weekly or monthly, but if the yearly premium is paid up front, it usually attracts a discount.
There’s another reason to pay annually: it’s a reminder to re-evaluate your policy annually to make sure you’re not paying too much. For example, your premium might be based on the market value of your car at the time you signed up for the policy, but of course that reduces as the vehicles gets older.