Car insurance is one of the most important financial decisions Kiwi drivers make, yet it's also one of the most confusing. With dozens of providers, multiple coverage types, and premiums ranging from $200 to over $2,000 annually, how do you choose the right policy without overpaying?
This comprehensive guide cuts through the complexity. Whether you're insuring your first car, switching providers, or simply want to understand what you're paying for, we'll walk you through everything from basic coverage types to advanced money-saving strategies used by savvy New Zealand drivers.
By the end of this guide, you'll understand exactly what type of insurance you need, how much you should be paying, and how to get the best deal from New Zealand's leading insurers including AA, State, Tower, and AMI.
Understanding Car Insurance Coverage Types
Key Insight: The right coverage type depends on your vehicle's value and your financial situation. Generally, comprehensive insurance makes sense for vehicles worth over $5,000, while third party options suit older, lower-value vehicles.
Comprehensive Car Insurance
Comprehensive insurance is the gold standard of car insurance in New Zealand. It provides complete protection for your vehicle regardless of who's at fault in an accident, plus covers damage you cause to other people's property and vehicles.
What's Covered:
- • Collision damage (whether you're at fault or not)
- • Theft and attempted theft
- • Fire and vandalism
- • Weather damage (storms, floods, hail)
- • Third party property damage
- • Windscreen and glass repair/replacement
- • Rental car while yours is being repaired
- • Towing and recovery costs
Typical Cost: $600-$1,500 per year (average $900)
Best For: Vehicles worth over $5,000, financed vehicles, or when you couldn't afford to replace your car out of pocket.
Third Party, Fire and Theft Insurance
This mid-tier option strikes a balance between cost and coverage. It covers damage you cause to others (third party liability) plus protects your vehicle against theft and fire damage.
What's Covered:
- • Damage you cause to other vehicles and property
- • Theft of your vehicle
- • Fire damage to your vehicle
- • Some policies include windscreen cover
Typical Cost: $350-$800 per year (average $550)
Best For: Older vehicles worth $3,000-$8,000 where comprehensive insurance seems expensive but the car still has value worth protecting from theft or fire.
Third Party Only Insurance
The most basic and affordable car insurance option. It only covers damage you cause to other people's property and vehicles. Your own vehicle has no coverage whatsoever.
What's Covered:
- • Damage you cause to other vehicles
- • Damage you cause to other people's property
- • Legal liability up to policy limit (typically $10-20 million)
Typical Cost: $200-$500 per year (average $320)
Best For: Vehicles worth under $3,000 where the annual comprehensive premium would exceed the vehicle's value.
Mechanical Breakdown Insurance (MBI)
While not technically car insurance, MBI is often purchased alongside traditional policies. It covers repair costs when your vehicle suffers mechanical or electrical failures.
What's Covered:
- • Engine and transmission failures
- • Electrical system faults
- • Air conditioning and cooling systems
- • Steering and suspension components
- • Braking systems
Typical Cost: $300-$800 per year depending on vehicle age
Best For: Vehicles outside manufacturer warranty, typically 3+ years old, or European vehicles with expensive repair costs.
Comparing New Zealand's Top Car Insurance Providers
New Zealand has a competitive car insurance market with over 20 providers. We've compared the top four insurers that collectively hold about 60% of the market share. Each has different strengths, and the "best" provider often depends on your specific circumstances.
| Provider | Market Share | Best For | Key Features | Price Range |
|---|---|---|---|---|
| AA Insurance | ~20% | AA Members | Up to 10% member discount, agreed value cover, 24/7 claims | $$-$$$ |
| State Insurance | ~15% | Safe drivers, bundling | Multi-policy discounts, flexible excesses, 160+ years experience | $$ |
| Tower Insurance | ~12% | Drivers 30+ | Lifetime repair guarantee, safety feature discounts | $$ |
| AMI Insurance | ~10% | Loyalty rewards | Excess reduces yearly without claims, flexible payments | $-$$ |
AA Insurance - Best for AA Members
As New Zealand's most recognized insurance brand, AA Insurance leverages its automotive expertise to provide comprehensive car insurance with member-exclusive benefits. Their policies include agreed value cover, which protects you from vehicle depreciation during the policy period.
Pros:
- • Up to 10% discount for AA Members
- • Nationwide network of approved repairers
- • 24/7 claims service
- • Strong brand reputation
Cons:
- • Higher premiums for non-members
- • Limited discounts compared to competitors
- • Stricter underwriting for young drivers
State Insurance - Best for Multi-Policy Bundling
With over 160 years of insuring New Zealanders, State Insurance offers straightforward policies with competitive pricing for customers who bundle multiple insurance types. Their safe driver programs reward claim-free history with significant discounts.
Pros:
- • Up to 20% multi-policy discount
- • Flexible excess options ($250-$2,500)
- • No-nonsense policies, easy to understand
- • Good for safe drivers with clean records
Cons:
- • Higher premiums for high-risk drivers
- • Limited coverage for modifications
- • Must bundle for best pricing
Tower Insurance - Best for Experienced Drivers
Tower Insurance provides competitive comprehensive cover with a focus on quality repairs and customer service. Their lifetime guarantee on approved repairs and discounts for advanced safety features make them attractive for newer vehicles.
Pros:
- • Lifetime guarantee on approved repairs
- • Discounts for safety features (ABS, airbags)
- • Competitive rates for drivers 30+
- • Choice of agreed or market value
Cons:
- • Higher premiums for young drivers
- • Limited third-party options
- • Less competitive for high-risk profiles
AMI Insurance - Best for Loyalty Rewards
AMI Insurance's standout feature is their loyalty program where your excess reduces by $50 each year you don't make a claim, potentially reaching $0 after several claim-free years. This makes them particularly attractive for safe drivers planning to stay long-term.
Pros:
- • Excess reduces $50/year without claims
- • Competitive pricing for standard vehicles
- • Flexible payment plans
- • Good customer service ratings
Cons:
- • Smaller approved repairer network
- • Limited specialty vehicle coverage
- • Loyalty benefits take years to maximize
Car Insurance Cost Breakdown for 2025
Understanding what drives your car insurance premium helps you make informed decisions and identify potential savings. Here's what New Zealand drivers are actually paying in 2025, broken down by multiple factors.
National Average Premiums (2025):
- • Comprehensive: $900/year
- • Third Party, Fire & Theft: $550/year
- • Third Party Only: $320/year
Cost by Vehicle Value
| Vehicle Value | Comprehensive | Third Party F&T | Third Party Only |
|---|---|---|---|
| Under $5,000 | $600-$900 | $350-$550 | $200-$350 |
| $5,000-$15,000 | $750-$1,200 | $450-$700 | $250-$400 |
| $15,000-$30,000 | $1,000-$1,600 | $600-$900 | $300-$450 |
| $30,000-$50,000 | $1,400-$2,200 | $800-$1,200 | $400-$550 |
| Over $50,000 | $2,000+ | $1,200+ | $500+ |
Real Pricing Examples
2015 Toyota Corolla - Auckland
35-year-old driver, clean record, $12,000 value
Comprehensive insurance with $500 excess
2020 Mazda CX-5 - Wellington
42-year-old driver, clean record, $28,000 value
Comprehensive insurance with $400 excess
2012 Honda Civic - Christchurch
23-year-old driver, 1 claim 2 years ago, $8,000 value
Comprehensive insurance with $1,000 excess, young driver loading applied
2008 Nissan Tiida - Dunedin
55-year-old driver, 10+ years no claims, $4,500 value
Third party, fire and theft with $500 excess
10 Proven Ways to Save Money on Car Insurance
New Zealand drivers can significantly reduce their car insurance premiums through strategic choices and smart shopping. Here are ten proven methods that can save you hundreds of dollars annually.
Compare Annually
Insurance premiums change regularly, and loyalty doesn't always pay. Comparing quotes from multiple providers each year can save $200-$500.
Potential Savings: $200-$500/year
Increase Your Excess
Raising your excess from $400 to $1,000 can reduce premiums by 15-25%. Just ensure you can afford the higher excess if you need to claim.
Potential Savings: $120-$300/year
Install Security Devices
Quality immobilizers, alarms, and GPS tracking devices can reduce premiums by 5-15% while also protecting your vehicle from theft.
Potential Savings: $45-$180/year
Bundle Your Policies
Insuring multiple vehicles or combining car and home insurance with one provider typically saves 10-20% on all policies.
Potential Savings: $90-$240/year
Pay Annually
Annual payments avoid monthly administration fees and interest charges, typically saving 5-10% compared to monthly installments.
Potential Savings: $45-$120/year
Maintain Clean Record
Avoiding claims and traffic violations keeps premiums low and qualifies you for no-claims bonuses of up to 30% after 5 claim-free years.
Potential Savings: $180-$450/year
Park Securely
Garaging your vehicle overnight or parking in secure locations can reduce premiums by 5-10% by lowering theft and damage risk.
Potential Savings: $45-$120/year
Review Coverage Type
As your vehicle ages, switching from comprehensive to third party when premiums exceed 10% of vehicle value can save significantly.
Potential Savings: $300-$800/year
Reduce Mileage
Some insurers offer discounts for low-mileage vehicles. If you drive less than 10,000km annually, ask about available discounts.
Potential Savings: $50-$150/year
Join Associations
Membership in organizations like AA, professional associations, or credit unions often provides exclusive insurance discounts of 5-10%.
Potential Savings: $45-$120/year
Regional Differences: Where You Live Matters
Your location significantly impacts car insurance premiums. Urban areas with higher traffic density and theft rates face premium loadings, while rural areas generally enjoy lower costs. Here's what drivers in different regions can expect.
Auckland
+20-25% PremiumAuckland consistently has New Zealand's highest car insurance premiums due to the country's highest theft rates and traffic density. South Auckland suburbs including Mangere, Otara, and Manurewa face additional premium loadings of 30-40% above the Auckland average.
Average Comprehensive Premium: $1,080-$1,350/year for a standard vehicle
Wellington
+10-15% PremiumWellington's hilly terrain, weather exposure, and capital city status result in moderate premium increases. Weather-related damage claims are more common here, and insurers factor in the region's seismic risk.
Average Comprehensive Premium: $990-$1,170/year for a standard vehicle
Christchurch
+5-10% PremiumFollowing the Canterbury earthquakes, Christchurch premiums stabilized below Auckland levels. The city's flat terrain and improving infrastructure contribute to more competitive rates, though some eastern suburbs still face higher premiums.
Average Comprehensive Premium: $945-$1,080/year for a standard vehicle
Hamilton & Provincial Cities
Base RateCities like Hamilton, Tauranga, Dunedin, and Palmerston North typically represent the baseline for New Zealand car insurance pricing. These areas balance urban infrastructure with lower theft rates and traffic density.
Average Comprehensive Premium: $900-$990/year for a standard vehicle
Rural New Zealand
-15-30% PremiumRural areas offer New Zealand's lowest car insurance premiums, with significantly reduced theft risk and accident rates. However, rural drivers should ensure coverage for gravel road damage, livestock collisions, and remote towing costs.
Average Comprehensive Premium: $630-$810/year for a standard vehicle
The Car Insurance Claims Process: Step by Step
Understanding the claims process before you need it ensures faster resolution and less stress during an already difficult time. Here's exactly what to do when you need to make a car insurance claim in New Zealand.
Ensure Safety First
If there are injuries, call 111 immediately. Move vehicles to a safe location if possible, and use hazard lights or warning triangles. Check on all parties involved and provide assistance if needed. Never admit fault at the scene.
Collect Information
Exchange details with all parties involved:
- • Full names and contact details
- • Vehicle registration numbers
- • Insurance company names and policy numbers
- • Driver's license numbers
- • Witness names and contact information
Document the Scene
Take comprehensive photos and notes:
- • All vehicle damage from multiple angles
- • The accident scene showing vehicle positions
- • Road conditions, traffic signs, and signals
- • Skid marks or debris
- • Any property damage
Contact Your Insurer
Report the claim within 24-48 hours. Most insurers offer multiple contact methods including phone (24/7), online portals, and mobile apps. You'll receive a claim number - keep this safe. Your insurer will guide you through their specific process and explain next steps.
Assessment and Repair
A claims assessor will evaluate the damage and provide a repair quote. You typically have two repairer options:
- • Approved Repairer: Often includes repair guarantees and streamlined processing
- • Your Choice: Select any repairer but may have longer processing times
Settlement
For repairable damage, your insurer authorizes repairs and you pay your excess. For write-offs (when repair costs exceed 60-80% of vehicle value):
- • Market Value Policies: Pay current market worth of your vehicle
- • Agreed Value Policies: Pay the pre-agreed amount in your policy
Most straightforward claims settle within 2-4 weeks. Complex claims involving disputes or investigations may take longer.
Important Claim Tips:
- • Never repair your vehicle before your insurer assesses it
- • Keep all receipts for any authorized expenses (rental cars, towing)
- • Respond promptly to all insurer requests for information
- • Understand that making a claim may affect your premium at renewal
- • Ask about no-claims bonus protection if concerned about premium increases
Frequently Asked Questions
Is car insurance compulsory in New Zealand?
No, car insurance is not legally required in New Zealand, unlike many other countries. However, it's highly recommended as you're personally liable for all costs if you cause an accident. Most finance companies require comprehensive insurance on financed vehicles, and it's mandatory for rental cars.
What's the difference between agreed value and market value?
Agreed value is an amount you and your insurer agree your vehicle is worth at the start of your policy. This amount is paid if your vehicle is written off, regardless of depreciation. Market value is what your vehicle is worth on the open market at the time of loss, which decreases over time. Agreed value offers more certainty but may cost slightly more in premiums.
Does my car insurance cover me if someone else drives my car?
Most comprehensive policies in New Zealand cover any licensed driver you give permission to drive your vehicle. However, there may be age restrictions (often 25+) and increased excesses for younger or inexperienced drivers. Always check your policy wording and notify your insurer of regular additional drivers.
Will my premium increase after making a claim?
Making a claim typically results in higher premiums at your next renewal, usually by 20-40% depending on claim size and fault. You'll also lose any no-claims bonus you've accumulated. However, premiums gradually decrease again after 3-5 years of claim-free driving. Some insurers offer no-claims bonus protection as an optional extra.
What modifications do I need to declare to my insurer?
You must declare all modifications to your insurer, including performance upgrades (turbochargers, engine modifications), body modifications (body kits, lowered suspension), wheels and tires different from factory specifications, audio systems, and security devices. Failure to declare modifications can result in claim rejection. Some modifications increase premiums while others (like security devices) may reduce them.
Does car insurance cover rental cars?
Your personal car insurance typically doesn't cover rental vehicles. Most rental companies offer insurance at the time of hire, or you can purchase separate rental vehicle excess insurance from third-party providers. Some credit cards offer rental car insurance if you use the card to pay for the rental - check your card benefits.
What happens if I'm hit by an uninsured driver?
If you have comprehensive insurance, your policy covers damage to your vehicle (you pay your excess). Your insurer may then pursue the at-fault driver for costs. If you only have third party insurance, you must pursue the uninsured driver directly for damages, which can be difficult and time-consuming. This is one reason comprehensive insurance is recommended even though it costs more.
How long does a claim stay on my insurance record?
Insurance claims typically affect your record for 5 years in New Zealand. Insurers ask about claims made in the past 5 years when you apply for new policies. After 5 years, the claim no longer needs to be declared and won't affect your premiums. Serious violations like driving under the influence can impact your record for longer.
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