Although car insurance isn’t compulsory in New Zealand, getting insurance on your lease or loan vehicle will usually be a requirement of your contract. Insurance is paid on top of your monthly payments and covers you in case of any accidents or if your car is stolen.
Your car loan dealer may have their own preferred insurance company to cover you for any breakdowns. Since your insurance benefits are worked out through your lender, you should check their website policy on what type of coverage you can get.
Before you agree to sign up for a loan, you should have an idea of what your insurance actually guarantees. Generally, your insurance will fall into one of two types:
- The market value of your vehicle before any damage occurs.
- The agreed value of your vehicle when you begin lending, reviewed each time your loan policy renews.
The amount of coverage you can get depends on your policy when you sign up. Third-party insurance will cover you for damage to your or someone else’s car in case of an accident, while a third-party, fire and theft cover more possibilities. Comprehensive insurance covers other additional breakages or accidents for a higher cost, while add ons will allow you to add additional options such as roadside rescue and windscreen repair.
If any incident does happen and you need to make a claim, your insurance company will ask you to pay an excess, which is some money towards helping cover the accidental cost. The higher excess you spend, the more money you can save on your initial premium (the amount you pay for insurance).
The amount you’ll pay for insurance coverage is decided based on several factors besides how much you want to spend. Your credit score, age and driver’s licence status all get factored into working out your insurance premium.