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Learn about car insurance

Posted on 08 April 2015

You may have already heard of comprehensive car insurance, but how much do you really know?
Here is a quick and easy summary of some of the key points.
While I have tried to use every day English, some terms were hard to avoid so I have included a brief explanation for those to help as well.

The question, "Is car insurance compulsory?" is a tricky one to answer. Under New Zealand law you currently do not have to have insurance to be able to drive your car. However, if you have decided to finance your car then under the terms of your finance the car must be fully insured at all times. Otherwise, it can be repossessed by the finance company.

Whether car insurance is compulsory or not, one thing is true – it is definitely worthwhile having, regardless of the vehicle you are driving. It may not be only your car involved in an accident. Without insurance you could end up paying for a very expensive car that you will never own or drive.

In plain terms, what is car insurance?
Car insurance is a payment you make to protect yourself financially in the event of an accident or theft (depending on your policy)

How do I pay for car insurance?
Most insurance policies can be paid yearly in a lump sum or in monthly instalments, however if you purchase a car from Enterprise and let us arrange your insurance then you may be able to pay it off weekly.

If I need to make a claim, what do I do?
If something happens to your car, for example it is stolen. After you contact the police, you will contact the insurance company to find out if it will be covered by your policy.

What is a claim?
A claim is an official request to the insurance company for them to pay for your repairs or a replacement vehicle.
Your claim will be reviewed by the insurance company to ensure that everything is not only correct and truthful but covered by the policy you have.
N.B. You cannot make claims on damage that was already there before you took out your insurance policy.

What is an excess?
The excess is the amount that you must first pay when you make a claim, for example, your excess may be $1,000 and the cost of the claim is $5,000. Once you pay the first $1,000 the insurance company will pay the remaining $4,000. The excess may vary depending on who the driver is. In a family, Mum and Dad on a full license will have a lower excess than their daughter on a restricted license. There is also an extra excess for people who are younger than 25.

What types of insurance are there?
There are 2 common types of car insurance. Full cover (or comprehensive as it is often called) and third party.

Third party insurance is the minimum level of cover you can have. This covers you for the cost of damages to the other person’s property if the accident is your fault, although unfortunately they won’t pay for the damage to your car. While this can be a life saver if you crash into something expensive, it will still leave you without a car.

Full cover insurance offers greater protection than third party. So, as well as paying for the damage to the other car, it will also pay for the damage to your car. You will also get cover if it is stolen or accidentally damaged.

Some of the other insurance terms you may hear are…

Premium- This is the amount of money you pay to the insurance company for your cover.

Write off- Fingers crossed you never hear this term because it means that the cost to repair your car is more than your car is worth. In this situation the insurance company will offer to pay you the current value of your car so you can purchase a new one.

The important fine print…

What is written here is only a brief summary and quick guide. It is essential you read and understand what you are getting cover for when purchasing any insurance. Make sure you talk to your insurance company to find out exactly what is included in your policy. If in doubt, talk to someone who can help like the local Citizens Advice or your church leader.

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