Vehicle Insurance 

What types of vehicle insurance are there?

There are three main types of vehicle insurance policy:

  1. Third party property damage. This covers you for the cost of any damage that  your vehicle does to another person’s vehicle or property, and is the cheapest type of vehicle insurance. It is often used when the car you drive is not worth much, as this type of insurance does not cover damage to your vehicle. 
  2. Third party, fire, and theft. This covers you for damage which your vehicle does to another person’s vehicle or property, and also covers you if your vehicle is stolen or damaged by fire.
  3. Comprehensive insurance. This usually covers accidental damage to, or loss of, your vehicle; damage to another person’s vehicle or property, whether or not it was your fault; and other costs, such as salvage costs involved in moving your car to a repairer from the scene of an accident.

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What do I need to watch out for when buying vehicle insurance?

Type of policy
You need think about what type of insurance coverage you want (see the previous question).

You'll also need to be clear about whether the policy is for an agreed value or for market value:

  • If you insure the vehicle for market value, then if it is stolen or written off, you will receive an amount equal to the car’s market value just before the damage or loss occurred. 
  • If you choose to insure the vehicle for an agreed value, then if the car is lost or ‘written off’ you will receive an amount equal to the sum agreed to at the last policy renewal. 

If your vehicle is quite new, the insurance cover may replace your car with a new one in the event it is ‘written off’ - so it's worth checking whether this would apply to you. 

It’s important to be truthful about the condition of the vehicle, your driving history, and who else will be driving the vehicle. Non-disclosure of this kind of information can result in future claims being declined or the policy cancelled.

Disclosure is particularly important when it comes to vehicle modifications. You must tell your insurer about any vehicle modifications when you're taking out your insurance policy.

It’s also important that the insurance is in the name of the main driver. If, for example, the insurance company finds out that you have insured a car in your name when the main driver is in fact your 20 year old son or daughter, they can cancel the cover and/or decline in the event of a claim.

The insurance cover on your vehicle is likely to be conditional, e.g. that you take reasonable precautions to avoid theft, that you drive within the limits prescribed by your driving licence, and so on.

It's important to read the policy document carefully, and ask about any clause you don't understand or aren't sure about.

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How can I save money on my vehicle insurance?

Find out about any discounts you're eligible for:

No-claims discounts
(or ‘no claims bonus’)

Higher excess discounts – Opting for a higher excess (that part of the repair bill which you will pay) can lower your premium. Check whether your insurance provider offers this. Some insurers have a minimum premium, and discounts can't be used to drop a premium below this level.

Age-related discounts -
Discounts are often available for older drivers (usually those aged over 55 or 60), and some companies offer policies exclusively to people over a certain age.

You can also do this the other way - agree that you won't let anyone under 25 drive your car, and that too can lower your premium.

(Conversely, drivers less than 25 years of age normally have a higher excess on their vehicle insurance, as do inexperienced drivers and those on learner or restricted licenses.)

Other discounts -
You can get a package discount from many companies – up to 20 percent in some cases – if you buy more than one type of insurance (e.g. home and contents insurance) from the same company.

Insurance companies offer other discounts too, for example if your vehicle is a hybrid car or if the car does fewer than 5000km in a year.

You might also get a discount for keeping your car in a locked garage, and for always using a professionally installed alarm or engine immobiliser.

Not all companies offer all discounts, but it is worth asking.

You can also save money by paying your premium annually rather than monthly. 
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What is a no-claims bonus?

Motor vehicle insurers offer a discount off the premium if you haven't made any claims over a certain time. If you have a no-claims bonus and then make an insurance claim, you would lose some or all of that bonus and your next premium would be more expensive.
However, many insurance companies will let you keep your no-claims bonus if you are eligible (e.g. once you have been driving incident-free for a specified period of time). It varies depending on the insurer, so it’s a good idea to ask about this if you are buying vehicle insurance.

Some insurance policies will also preserve your no-claims bonus if your claim is for a broken car windscreen or window. 

There is also the option of a 'protected no-claims bonus', which we go into in the next question.

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I've been offered a 'protected no-claims bonus', what does this mean?

Some motor vehicle insurers offer the option of protecting a no-claims bonus so that one unlucky accident will not reduce a maximum no claims discount. A maximum no-claims bonus could be up to 70% (which means that you’d retain a discount of up to 70% on your next premium if you make a claim) so if you have a full discount it can be worth preserving.

This may sound like a good thing, but you might have to pay extra for it - if this is the case you'll need to weigh up the pros and cons of getting this add-on. Also, the 'protection' may only allow you to maintain your current discount for one claim in the policy year, so that you lose some or all of your no-claims bonus if you make more than one claim within a year.

The rules for no-claims protection varies between insurers. If in doubt, you should always ask them.

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Who is the 'second party' if the 'third party' is the person who crashed into my car?

The second party is the insurance company, and this makes sense as they are in between the 'first' and 'third' parties. Your insurance company will 'step into your shoes' for the purpose of doing things like recovering payment from someone who has crashed into you.

Once you have submitted a claim to your insurance company, it's not a good idea to deal with the other party directly, as you could contradict what your insurance company is telling them.  

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I own an older car that I maintain really well, and the insurance company has limited my insured amount to $1000! What happens if I don't agree with the insurance company's assessment of my vehicle?

Motor insurance policies will cover you for up to either an agreed value or the market value of the vehicle:

If your policy is for an agreed value, and you don't agree with an insurance company's assessment of the value of your vehicle, you can seek a second opinion from a qualified person such as a car specialist or mechanic. The insurance company doesn't have to accept the second opinion but, if they don't, you may be able to negotiate a compromise between the two assessments.

If you and your insurance company cannot agree and you think they are being unfair, you can begin the disputes process by making a complaint.

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What happens if I have to claim on my vehicle insurance after an accident?

If your vehicle is involved in an accident, you can make a claim to your insurance company. They will want the registration number of the other vehicle involved in the accident, as well as the name and address of the other driver.
It’s important to get your claim in and wait for the insurance company’s response, before getting any repair work on the car. If the repairs to your car will cost more than what the car is worth, your insurer will probably decide it is a ‘write-off' and pay you the amount insured instead of paying for repairs (or, if it was a new car, replace it for you). Otherwise, they will ask you to arrange for the car to be repaired – depending on the insurer, you may have to select a repairer from a list of approved auto repair providers.
How your claim proceeds will depend on the amount of insurance cover of you and the other driver:

Both parties have comprehensive insurance
If both parties involved in an accident have comprehensive insurance, the insurance companies will handle the claims from their respective clients (that’s you and the other driver). If the other person has admitted liability, or you can prove they were at fault, you may even be able to keep your excess and no-claims bonus. 

One party has comprehensive insurance, the other party has third party insurance
If you have comprehensive insurance, your insurer will try negotiate with the other party's insurer and hope to get them to pay for damage to your vehicle. The other party's insurance won't cover damage to their own vehicle.

If you are the one with third party insurance, then your insurance won't cover damage to your vehicle (see our next question for more on that) - but the other driver's insurer can try to get your insurer to pay for their client's repairs.

Other party is uninsured
If the other driver is not insured, and you have comprehensive insurance, you can still make a claim on your policy. Unfortunately, if your insurer cannot recover their costs from the other party, the claim may affect your no claims bonus and you may have to pay the excess. You can make a claim to the Disputes Tribunal or the District Court to try to recover the money from the other party.

More about this is in our next question.

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I am uninsured and someone crashed into me. They are insured and admitted they were in the wrong. How do I get my repairs paid for by their insurer?

If you are involved in an accident and the other party accepts responsibility for it, then they are liable for any damage done to your vehicle.

If they have motor vehicle insurance then their policy may cover any damage done to your vehicle.  If this is the case then when the other party puts a claim in to their insurer to cover damage to their own vehicle they should include information about your vehicle - including whether it was also damaged. If they admit in the claim that they were at fault, then their insurer will normally cover the cost of repairs to your vehicle.

In general an insured person is obliged to tell their insurer about anything that might affect their insurance cover, for example about any vehicle modifications or previous accidents when they renew their policy (this is called duty of disclosure).
If the other party won’t admit that they were at fault, you can make a claim to the Disputes Tribunal to settle the dispute over who is liable. The Dispute Tribunal can hear disputes where the claim is for $15,000 or less. Try this option before engaging a lawyer, as fees for lodging a claim with the Disputes Tribunal are relatively low compared to the cost of going to Court.

Where going to the Disputes Tribunal is not an option, you can apply to the District Court. If you proceed with this option, you should seek legal advice and get a lawyer who has knowledge of the insurance system to represent you, as it can be very complicated to make an insurance-related claim.

If you do not have a lawyer, your local Citizens Advice Bureau will be able to help you find one, and provide you with information and support. If you cannot afford a lawyer, you may be eligible for legal aid.

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My insurance company had my car fixed, and I'm not satisfied with the repairs. What can I do?

Any repairs carried out on your car by an auto repair provider, must be 'of an acceptable standard', and 'carried out with reasonable skill and care'. Be aware that it may not be possible to paint replacement parts to match the rest of the vehicle exactly, and your insurance cover may not pay for the cost of repainting the rest of the vehicle to match the new parts.

If you're not satisfied with the repairs, don’t sign the discharge form, which counts as confirmation that the repairs have been completed to your satisfaction. 

Repairs which are carried out by a repairer approved by your insurance company, are generally guaranteed. If the repairer won’t agree to remedy the problem, you can talk to your insurer about it.

If your policy doesn’t guarantee repair work done on your car, or you used a non-approved repairer, you may have to negotiate with the repairer – or make a claim to the Disputes Tribunal.

If you and your insurance company cannot agree and you think they are being unfair, you can begin the disputes process by making a complaint.