Car insurance basics

We explain types of cover, agreed or market value, and excesses.

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We explain the basics of car insurance – types of cover, agreed or market value, and excesses.

Comprehensive cover

Comprehensive policies cover your car if it’s damaged or stolen as well as the damage you cause to someone else’s car or property.

They also offer extra benefits. For instance, they’ll cover the cost of towing your car to the nearest repairer or safe location following an accident, and provide reasonable costs to transport you home.

See our policy comparison database for cover details.

Third-party cover

Third-party only policies cover you if you damage someone else’s car or property. They’re not designed to cover damage to your vehicle.

That said, most policies offer a limited payout if an uninsured driver crashes into you and you’re able to supply their registration and contact details. Trade Me Insurance is an exception here: it doesn’t provide third-party only policyholders with protection against uninsured drivers.

Based on our annual premium survey, a third-party only policy for an individual is about 3 to 4 times cheaper than a comprehensive policy.

Third-party fire and theft policies provide the benefits of third-party only policies plus they cover you if your car is stolen or damaged by fire.

As this level of cover provides some protection for your car, you may get access to benefits not offered to third-party only policyholders. For instance, Youi provides limited cover for contents in your car if you hold a fire and theft policy, but nothing if you hold a third-party only policy.

A third-party fire and theft policy for an individual is about half the price of a comprehensive policy.

Agreed or market value

One of the biggest questions when you shop for car insurance is what value to place on your car.

Many members have told us they don't find the companies helpful here. There are two options: market value (indemnity insurance) or agreed value.

Market value

Market value policies cover the cost of your car immediately before the damage occurred. The payout is based on the amount a similar car would fetch on the retail market as determined by your insurer.

Agreed value

With agreed value policies, you and your insurer agree on your car’s value. Your insurer will pay the agreed amount if your car is written off provided you’ve met the policy’s terms and conditions. As your car’s value decreases with age, the agreed amount should be revisited whenever your policy is renewed.

Agreed value policies give you greater certainty about the amount you’ll receive if your vehicle is written off.


If you need to make a claim, it’s likely you’ll have to contribute the first few hundred dollars towards your car’s repair or replacement. This is called the excess.

All policies come with a standard excess. Most allow you to choose a higher excess in exchange for lower premiums or vice versa.

Younger drivers – or those on a restricted or learner’s licence – usually get stung with a higher excess. This can be as much as $1800 for a driver under the age of 21 with a learner’s licence.

What about the kids?

You should ask your insurer to list your children on your policy if they regularly drive the family car. This will usually mean a higher premium as young drivers are seen as a bigger risk. Depending on your insurer, you may also lose your “no under-25 drivers” discount.

But if you don’t get your children listed on your policy, you may not be covered if they crash your car. Alternatively, you could incur a sizeable excess. For example, Trade Me charges an additional $1950 if you claim for damage caused by an unnamed driver who has held a licence for less than 2 years. You can avoid this excess if you add cover for unnamed drivers.

Tip: Parents sometimes take out policies in their own names to cover cars typically driven by their children. This is a bad idea. If the insurer deduces you’re “fronting” for your kids, it can decline any claims and avoid the policy. You’ll be out of pocket – and you might find it difficult to get cover in the future.

More on car insurance

More on car insurance

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More on car insurance

Learn how to choose the right car insurance policy with our buying guide, plus compare 17 comprehensive policies and their premiums.

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