Imagine breaking down on the freeway and having to cover the cost of towing your vehicle to a garage and paying for the repairs.
What if you have an accident that involves a high-value car – will you be able to cover the damages? This is obviously a very costly occurrence that many people are not financially capable to cover and this is where your insurance policy will come in. Just like medical insurance, car insurance is very important to ensure that should something unfortunate happen, you’ll be covered. There are two main types of car insurance policies that can be taken out and we will discuss each type in turn while adding examples of what will be covered and what will not be covered. It is important to note however, that in New Zealand all citizens, residents and visitors are covered by the ACC or, Accident Compensation Corporation for any personal injuries incurred and, in the context of car insurance - those sustained as a result of a car accident. You will be compensated for any lost earnings if you are hospitalized or require time to recover at home and are unable to work. The ACC do not however, cover the costs of repairing your vehicle, the other party’s vehicle or any property damage caused as a result of an accident and this is why having car insurance is of paramount importance.
Third-party vehicle cover
This is generally the most affordable form of car insurance and will only cover for the cost of repairs to damage done to another person’s car or property. Since any damage to your vehicle will not be covered this type of policy is only suitable if your vehicle is not of a high value. Third party fire and theft will cover any damage done to another person’s car or property and will also cover you if your car is stolen or damaged by fire. Certain policies will provide you with a capped coverage in the event that your vehicle is damaged in an accident that was not your fault (i.e. someone hit your car) and this individual’s car was not insured. This will save you the hassle of trying to get money out of someone who isn’t insured and although it may not cover the entire cost of repairing you car will certainly help. Due to the low premiums this type of policy is common amongst younger drivers however, since younger drivers pose a greater risk to insurers, the policy may not be quite as low as one provided to an older, more experienced driver.
Comprehensive car insurance
This is the safest type of car insurance and it’s also the most common among New Zealanders as it covers for all of the above mentioned scenarios in addition to covering any damage done to your own car. Additional expenses such as salvage and tow truck services to move your vehicle from the accident scene is also included in this type of insurance policy. Most comprehensive car insurance policies will cover you for spare parts and will also ensure your vehicle is replaced should it be written off. In the event that your windscreen or any car window needs to be replaced or repaired, most comprehensive insurance policies will retain the “no-claims bonus” and not charge excess. If you're planning on taking out this type of insurance policy make sure that it includes all the mentioned coverage.
Regardless of what type of insurance you take out or who the insurer is, your car will either be insured on an agreed value or on market value and this, apart from the type of insurance, is the most important decision you’ll have to make when taking out car insurance. Known as an indemnity policy, market value insurance policies will place a value on your car based on its value on the open-market. A policy taken out on an agreed value will pay out a previously agreed upon amount in the event that your car is written off while a market value policy will pay out the value of the car based on what it can fetch on the open-market. There are insurers who offer both agreed and market value policies however, some offer only one or the other and it is up to you to decide how you want your car valued. When shopping around for insurance quotes - it’s important to inform the insurance representative of which one you want specifically as this will ensure you receive an accurate insurance quote. Generally, taking out a market value policy will help lower your monthly premium however, should your vehicle be written off you won’t get the same amount that you paid for your car. If you opt for an agreed value policy your premiums will be higher but you’ll be able to recover all of your money should your car be written off. It’s important to understand that your car will depreciate in value over time so you may have paid a handsome amount for it but, a year or two down the line, the car would be worth about half of this value. Any car that is of an exceptional value whether this is sentimental, financial or by virtue of rarity such as an antique or modified vehicle, should be insured based on an agreed value. When you renew your insurance policy this agreed value will change – and it’s important that you ensure it does – as this may lower your premium and ensure you don’t get any nasty surprises if something happens to your car. In addition, not updating the agreed value regularly may cause your insurer to refuse to pay out the agreed value and this is one of the most common insurance pitfalls that you need to be aware of and avoid. If you opt to go for the market value policy you should also ensure that the value is adjusted when you renew your policy as this will lower your premiums as the value of the car decreases.
Saving on your car insurance quotes
Many people have a mass of questions on how to save on their car insurance and there are certainly some factors that will affect your insurance policy premiums however the market is generally quite balanced and premiums don’t vary too wildly from one provider to the next. This is a result of strong competition from a variety of insurance providers – and since they’re all gunning for your business most of them have adjusted their premiums to match that of their competitors. Most people have heard of the fact that the type of car you drive has an impact on your “risk profile” as does your age and your claim history but there are other, lesser-known factors. Firstly, any performance modifications done on your car will be interpreted as a greater risk to the insurer – even if this modification has very little to do with safety. If you do have any modifications on your vehicle it is critical that you inform your insurance upfront as failure to do so may result in your insurance denying a payout later. Even if you have not ordered any modifications on your car it is possible that your car has some modifications made by the manufacturer or in some cases, previous owner and this will also be considered by insurers to be a modified car. To ensure you don’t end up in a difficult position it’s absolutely critical that you enquire about what features are considered to be modifications – and check to see if you're vehicle has any of these.
All the terms and conditions should be carefully reviewed and understood – from the type of policy to how you choose to value your car and the excess you’ll have to pay - you need to be very clear on every single detail of your policy. In addition, you should know exactly what you're covered for and what you're not, as well as any conditions that will cause your insurance policy to be considered null and void. There are obvious deal-breakers such as driving under the influence of alcohol or drugs and taking prescription medications that clearly indicate driving or operating machinery is prohibited. If you have a decent amount of savings available to you and would like to cut your premiums – you could decide to agree to a higher excess. This, as mentioned before isn’t recommended for high-value cars as you’ll certainly end up paying more than sum of premiums. In conclusion, an older vehicle may be insured with a third party policy but new vehicles and unique, high-value or modified ones should always carry a fully comprehensive policy.
Bear in mind that when you take out a car insurance policy you will also be offered a range of additional cover options, many of which may be important to you depending on your personal circumstances. One such additional coverage is road-side and breakdown assistance which, in the case of those who travel large distances or travel frequently is an absolute must. Other optional cover may include free car hire in the event that your vehicle is damaged and in for repairs and even excess-free window and windscreen cover or guaranteed no-claims bonuses which may not be the deciding factors when choosing an insurance provider or when deciding between the different policies but, it certainly doesn’t hurt.
