Understand different vehicle insurance policies and cover. Learn how to pay less. Avoid having your claim refused.

Car insurance can cover you if:

  • your car is damaged or stolen
  • you are responsible for damaging somebody else's property or car.

What you're covered for, and how much your insurance company will pay, depends on the type of cover and policy you have.

Even with insurance you must take reasonable care to avoid accidents and theft, such as making sure your car is safe to drive, locking your car.

Cover types

You can take out insurance to cover the vehicle's:

  • Market value — what your vehicle is worth just before it is damaged.
  • Agreed value — a value you and your insurance company agree on when you take out your policy and each time it renews.
An insurance premium is how much you pay each year for your policy.

Policy types

Motor vehicle insurance can be:

Third party

Third party is the least expensive car insurance policy type.

It covers you if:

  • you damage somebody else's car, such as in a traffic accident or hitting a parked vehicle
  • your car damages another person’s property, for example, you drive over someone's laptop or lose control and hit their fence.

If you have third party insurance and someone else hits your car and admits fault, their insurance should cover the cost of repairs to your car. In some cases your insurer may chase compensation for you if the person has admitted fault and doesn't have insurance.

Third party, fire, and theft

This policy covers you if:

  • you damage somebody else's property or car (same as third party insurance)
  • your car is stolen or catches fire.


This policy covers:

  • accidents you cause or caused by someone else
  • damage to yours or somebody else's property or car
  • some other costs, such as towing fees if your car breaks down or is in an accident.

Comprehensive insurance is generally a more expensive insurance policy option. It pays out for the widest range of situations, including damage to your own car.


As well as standard comprehensive policies, you can buy extra cover at the time when finance options are used to buy a car. These all add extra costs to your premium whether they be Asset protection, Credit Contract Insurance, Payment Protection Insurance., Roadside rescue or excess waiver. Before adding extra costs to your premium, ask yourself if they're in your budget and if you really need added protection.

Example — Three drivers, three policies

Sade chooses a third-party policy to insure her small car worth $650. Sade is more worried about driving into a BMW than anyone hitting her vehicle. And the comprehensive cover she is quoted costs almost as much as her car.

Jarrod paid $1,000 for his car. He's on a budget but decides to pay extra for a policy which covers third party, fire and theft. A few vehicles have recently been stolen from his street. Jarrod feels better knowing he'll get back some of his vehicle’s value if thieves target his car.

Tihema's Toyota Wish cost $12,000. She chooses a comprehensive policy to insure it. She decides replacing her car, or getting it fixed after an accident, would cost much more than the annual premium. As she regularly goes on road trips, she takes out additional cover. She would like to be able to make a claim if loose chippings crack her windscreen, or she breaks down and must be towed.

When you compare insurance policies, don't just go on price. Look at what each policy covers.


If you make a claim and it is accepted, your insurance company will ask you to pay an excess. This is money towards covering the costs of the damage. Apart for some windscreen cover, you will pay an excess no matter which policy or cover type you have.

Choosing a higher excess means you share more of the risk so can save you money on your premium — or how much you pay to insure your car. Think about how easy it would be to pay the excess if you needed to make a claim before deciding if this suits you.

Example — Pay first $300 of repair bill

Maria drives into the back of Lydia's car. She has a third-party policy with a $300 excess. When the insurance company accepts Maria's claim, she must pay $300 towards repairing Lydia's car. Her insurance company pays the rest.

How to pay less

If you're in a car accident get the name, address and telephone number of other drivers involved. Ask for the name of their insurer and make a note of their registration and drivers licence details. If you can, photograph the damage on your phone.

Think about insurance costs when deciding what car you can afford.

How to pay less

Having a clean driving licence and not making claims make the biggest difference to what you pay. The type of car you have plays a big part, too.

Here are other ways to reduce your car insurance premium:

  • Name specific drivers on your policy — but be careful not to let anyone who isn't named drive your car.
  • Shop around — don't just look at price. Look at what different policies cover and what they exclude.
  • For lower value cars, choose third party or third party, fire, and theft policies.
  • Ask for a discount if you have other policies, such as house or contents insurance, with the same insurer.
  • Tell your insurer if you park your car in a locked garage, or your car has an alarm.
  • Only take extra cover you really need, such as breakdown insurance.
  • Be aware you'll pay a higher premium for drivers who are under 25 or who don't have a full licence.

Read more on Researching cars and sellers

Common reasons for refused claims

Very few claims are turned down, say Insurance Council New Zealand. But your insurer may question your claim or refuse to pay if you:

If you only have third-party insurance, you are not covered for damage you cause to your own car, eg if you reverse into a wall you will have to pay for your own repairs. Check with your insurer what your policy does and does not cover.

If your car is in an accident and it's not safe enough to pass a Warrant of Fitness, eg tyres with thin tread, your claim may be refused.

Your insurer will ask if you drank alcohol in the hours before an accident. If you did, you must tell them — even if you weren't over the legal limit. Otherwise they might deny your claim.

If you have a restricted licence and cause an accident while carrying passengers, or after 10pm, your insurer may not pay. If you drive a truck when your licence only allows you to drive a car or van, your claim may also be turned down.

If you name drivers on your policy, be careful not to let anyone other than named drivers use your car. If you do and they have an accident, your insurer is unlikely to honour your claim.

Vehicles used for work, e.g. for deliveries or a builder's van, need business insurance. You may not be covered if you damage your car while using it for work.

You must tell your insurer if you have ever been charged with drink driving, driving after taking drugs, speeding or reckless driving.

Tell your insurer if your car has been altered, eg lowered, given a custom paint job or had its performance boosted. If you have an accident, you may find you should have been paying more and your policy does not cover these modifications.

If you are down as the main driver but your child mostly drives the car, you may not be covered if they have an accident.

Your insurer needs to know if you have made any claims to other insurance companies — even if they were not successful.

If you left your car unlocked in a supermarket car park for a week with the keys on the seat, and it was stolen, you may not have a claim.

Disputing a refused claim

If you have had a claim refused and disagree with your insurer's decision, first take it up with their complaints team. If you can't sort it out directly, ask your insurer which dispute resolution service they belong to and get advice from them.

Read more on Motor Vehicle Insurance(external link) — Insurance Council of New Zealand