Car Insurance Excess Explained

Insurers use car insurance excess to help keep the premiums on their plans and policies more affordable. It also works by keeping drivers from making frequent claims for minor or inconsequential damage, given that these costs have a tendency to add up over time. 

It is this excess that helps keep the costs of handling and meeting insurance claims possible for both the provider and the driver. It makes sure that the insurance claim is reserved for major damage to the vehicle. These are incidents where a driver may find themselves having a hard time paying for it all out of pocket.

Car insurance excess explained

A car insurance excess is the total amount you have to pay when you make a claim on your car insurance policy. It is most likely composed of the total of your compulsory and voluntary excesses, requiring some responsibility on the part of the driver when it comes to the financials.

The total amount of excess you need to pay depends on a lot of factors. For example, your car, your age, your driving history and experience, and whether or not you’ve added some benefits like a No Claims Bonus guarantee, or excess insurance policy. For some, you may be able to adjust this amount through your voluntary excess, allowing you to lower your monthly premiums if you wish.

Types of car insurance excess

There are a few different car insurance excess types you need to keep in mind. The most common types to look out for are:

Standard excess

This is an excess that applies to any claim. The amount would have varying amounts of standard excess depending on what is discussed. Most of the time, many car policies will apply a standard excess of NZ $400 along with other related amounts. Sometimes though, your policy will state that no excess applies. This is typically based on:

• Where you live
• Your Car
• Type of policy
• Claims history

Read: How To Find The Best Car Insurance In NZ

Voluntary excess

This is an amount you 'volunteer' to pay out of pocket on top of the standard excess you’re already required to pay, depending on the level of cover you have. Most of the time, this is where you save on your premiums by choosing to pay a much higher excess. It might sound counterintuitive at first, but choosing a higher excess is typically used by people who don’t claim as much in order to save a bit of money.

Imposed excess

This is imposed by the provider for incidents they might deem as higher risk. For example, if the vehicle type registered is one that is commonly stolen, an insurer may impose a higher excess when it comes to securing it.

Age and licence-related excess

This is a type of conditional excess that applies depending on certain circumstances. For example, if you or one of the drivers in your policy is under 25 years old, you may be charged an additional excess on top of the standard amount you need to pay. This also applies to alternate licences such as a learner’s, restricted, or overseas licence.

Read: Driving In NZ? Here's How To Save Money On Fuel

Can I waive my insurance excess?

No, your car insurance excess applies regardless of who is at fault. You can't waive it unless your policy specifies that the scenario falls under a ‘No Excess Applied’ benefit.

Sometimes, if you have a claim for two different policy types with the same provider, you may be asked to pay only one excess, usually the higher of the two. Additionally, some insurers provide benefits like windscreen, window glass, and key cover where you don’t need to pay an excess for these things. Always check your policy documents to see what is and isn’t covered and which situations the excess payments apply to.

Am I still required to pay the car insurance excess even if the accident is not my fault?

This depends on the insurer. For example, State Insurance is willing to refund your excess in certain situations, provided the other driver is at fault. However, this is the more difficult part. You will need to provide enough information regarding the incident to properly identify that the other driver was at fault.

You’ll need things like the car registration number, name, address, contact information, and even their insurance information, if they have any. And of course, the other party must accept the liability.

Read: Guide To Used Car Financing In NZ

What is excess insurance?

This is a type of policy that covers the cost of your excess fees in the event you need to make an insurance claim. Say, you need to pay around NZ $200 in excess following a car insurance claim. With an excess insurance policy, you now have the chance to get that money back. The number of times you can claim this benefit depends on the policy you choose. Always ask your provider for more details.

So should I take out excess insurance?

It depends on your circumstances. You probably shouldn’t be signing up to pay more for voluntary excess if you will have a difficult time paying for it. If you find yourself faced with limited options, you can try for an excess insurance policy to give you some breathing room when it comes to your compulsory excess. While it initially seems like an additional financial burden, it might be necessary to help you save in the long run.

Alternatively, you can put your money in an interest-paying savings account. After all, you’re only charged an excess when you make a claim after your car is damaged.

So if you’re a particularly safe driver, your chance of needing to make a claim is drastically reduced and you may even get the opportunity to use the money on something else.

Read: The Ultimate Guide To Mechanical Breakdown Insurance in New Zealand (MBI)

Where can I find a car insurance excess that works for me?

You need to start by speaking to different providers and comparing their deals. Aside from just the excess amount you are comfortable with, you may also want to look into other aspects of the policy. How comprehensive is its coverage? What benefits do they provide which would allow you to find a better balance between your premiums and your excess? 

Of course, this can be very time-consuming, and you might need help in that regard. In this case, you can start your research here at glimp. Just visit our FREE car insurance comparison page and we’ll sort out all the available deals to ensure that you get only the most relevant policies.