Vehicle Insurance: Drive with Peace of Mind

Both private and commercial motor vehicle insurance can cover you for accidental damage, if your vehicle is stolen, vandalised or involved in any accidents with a third party. Even though your vehicle may not be damaged, accidents can involve other people, other vehicles and other people’s property, for which you could be held liable.

In 2022 alone, over $1.4 billion in commercial and private motor insurance claims were paid out in New Zealand, according to the Insurance Council of New Zealand, marking a significant 13% increase from the previous year*. This highlights why it’s important to have vehicle insurance to ensure you have the right support if and when you need it.

Benefits to consider:

• Repair or replacement of your vehicle up to the market or agreed value
• Transport and towing expenses
• Windscreen and window glass cover
• Protection against uninsured drivers
• Costs to travel home if your car is not safe to drive following the accident
• Rental cover to get you back on the road in case of a claim

It is important to check which benefits are included with any cover and ensure they are tailored to your needs.

For both private and commercial vehicle insurance, there are generally three levels of cover to choose from.

1. Fully Comprehensive (Agreed or Market Value): Provides cover for accidents, theft, fire, vandalism and storm damage as well as damage to someone else’s vehicle or property caused by your car.
2. Third Party, Fire & Theft: Provides cover if your car is stolen or damaged by a fire, as well as damage to someone else’s vehicle or property caused by your car but does not cover damage to your car.
3. Third party only: Provides cover if you cause damage to someone else’s vehicle or property but does not cover damage to your car.

Having a clear understanding of these coverage options will help you make an informed choice to protect your assets and ensure peace of mind on the road. Some key insights worth considering are as follows:

• Certain occupations, like driving instructors, real estate agents, couriers, taxi or Uber drivers, are not covered under a private vehicle insurance policy.

• For drivers under 25 years of age, a higher excess or insurance premium may apply.

If you have decided on full comprehensive cover, the next important step is to decide if you want to insure your vehicle for an agreed or market value.

• Agreed value: This is the maximum amount your car will be insured for in case of total loss or theft, and it should be enough for you to buy a vehicle with the same specifications. One of the benefits is greater certainty over how much you will receive for a replacement vehicle if your car is written off, although your agreed value will normally be adjusted annually to account for depreciation.

• Market value: This is based on the amount the retail/open market is currently paying for your vehicle just before it was damaged or stolen. The insurer will usually obtain a pre-accident valuation at the time of loss and the value may differ from the price you paid for the vehicle originally. The insurer considers several factors including the condition, age, make and model, milage, deferred maintenance and accident history.

What’s driving changes in vehicle insurance premiums?

You should expect that your vehicle insurance premiums are likely to increase when you renew your policy, even if your circumstances haven’t changed throughout the year. This is due to various factors (as listed below). As the effect of each will be based on your circumstances, your broker will discuss what this may mean for you, and work with you to ensure your cover is tailored to your needs.

• High inflationary environment: The high inflation rate (6% in June 2023 quarter**) mean that the cost to repair and replace vehicles has increased.
• Increase in claim volumes: This is mostly due to severe weather events (such as vehicles being written off because of water damage), and rising car theft. In fact, car theft claims skyrocketed in 2022 and the Toyota Aqua was the most frequently stolen car in New Zealand, according to AMI Insurance. ***
• Type of car: The cost and availability of replacement parts can vary based on a vehicle’s make, model and age.
• Location: Areas with higher occurrences of theft and vandalism may see higher premiums, and more highly populated areas can mean an increased likelihood of damage occurring.

Value of second hand cars

Since the start of the Covid-19 pandemic, second hand cars have generally held their value better than they used to, due to supply chain delays, parts shortages and other factors. In fact, prices for second-hand cars have risen by 68% in the past four years, according to Trade Me, with the median listing price for a second-hand car in February 2023 being $16,000 (compared with just $9,500 in the same month of 2019).****