Price is most often the deciding factor when considering car insurance, but is the cheapest car insurance always the best for your circumstances? Let’s consider what other factors are involved when choosing car insurance.
What other factors should I consider?
Although the price of car insurance is an important criteria for many Kiwis, other factors such as the extent of cover, the policy benefits and how your claim will be settled in the event of a total loss are equally important, and in the long run can end up saving you both time and money.
Extent of Cover
The extent of cover refers to what you are actually covered for, such as theft, damage to your or another driver’s car, towing following an accident, locks, and temporary accommodation. There are often two types of covers to choose from – comprehensive (full) cover and third party cover. Your choice of cover will determine how much you pay towards your premium and in return how much your insurer will pay out, should you make a claim.
At AA Insurance we offer three types of cover – one comprehensive cover (Comprehensive) and two third party covers (Third Party and Third Party, Fire & Theft). The variety in cover options allow you to choose the cover that best suits your situation. Let’s go through them quickly now.
Comprehensive is our most extensive cover, offering cover for any accidental damage done to your car as well as any damage done to other people’s cars or property. Comprehensive also includes temporary accommodation, trailer cover (which is limited to $1,000), and a keys and locks benefit. We often recommend this type of cover to those who have an average to high value car, or travel out of town quite often. Get a Comprehensive Car Insurance quote.
If price is an issue or your car isn’t worth much, then third party insurance which, at around $4 a week is less a cup of coffee, can be a great option as at least it will cover you for the damage you might do to other people’s property.
Third Party insurance covers the damage you cause to any other car or property in an accident, meaning this is no cover for your car (see Cover for accidents with an uninsured third party section below). Those who have cars with a lesser value often choose this type of cover as they feel their car is not worth insuring but are concerned they are covered for damage they may cause to other car(s) or property. So, the value of your car may be a good guide as to what sort of cover to go for. Get a Third Party Car Insurance quote.
Third Party, Fire & Theft
Third Party, Fire & Theft is an extension of the Third Party policy and not only covers the damage of other people’s property but also covers your own car if it’s damaged by fire or stolen. These two added benefits mean this cover is a little more expensive than Third Party, and is popular with student drivers who may not have a high value car or aren’t in a financial position to pay for damage to other cars or property. Get a Third Party, Fire & Theft Insurance quote.
Cover for accidents with an uninsured third party
We understand that a customer with third party cover can sometimes be involved in an accident with an uninsured driver who causes the crash. Yet it’s our customer’s car that ends up damaged. So, this is where our ‘Cover for accidents with an uninsured third party’ comes in. For those customers with Third Party or Third Party, Fire & Theft policies we’ll cover accidental damage to their car up to a limit of $4,000. To be eligible for this cover, the damage to their car has to be the result of an accident with an uninsured driver who admits fault, and our customer must provide the uninsured driver’s details.
The benefits of your policy are largely dependent on the cover you choose. For example, our Comprehensive insurance policy covers the cost for towing, transport and storage of your car if you are in an accident, whereas our Third Party policies do not offer this. If you aren’t an AA Insurance customer it’s worthwhile asking your insurer what benefits are available.
How your claim will be settled – Market value vs Agreed value
If your car is written off as a total loss, meaning it’s not economical to repair, it is important to know how your insurer will settle your claim. There are two options insurers mainly use – market value and agreed value – and these will be discussed with you when you take out your policy.
Market value looks at the current value of your car at the time of loss. If your insurer settles on market value, they usually look at an average value for your type of car to help guide the amount you will be paid out. The down side is you don’t know how much your car is actually worth and could be surprised at how much you will be paid out. You may also learn that you have been paying a disproportionate amount between your premium and the value of your car.
At AA Insurance, all our policies are based on agreed value. Agreed value means you have more of a say as to how much you want your car to be insured for. This is mainly because you know your vehicle better than anyone else and can give a more accurate indication of its worth.
Regardless of the market value, with agreed value your insurer agrees to pay out the amount your car is insured for on your most recent policy schedule. No surprises. No haggling. No hassles. It often means your claim will progress quicker as well, because the value had already been agreed on at the time you took out your policy, so there’s no need for your car to be assessed.
In the end, agreed value could save you both money and time when it comes to getting your claim sorted.
What if my car only needs to be repaired?
Our claims data shows that most car accidents involve repairs rather than full replacement, so it’s worth checking with your insurer the quality and process of the repair work that’s undertaken should you need to make a claim.
You want to be sure your car will undergo a quality repair and that the work and parts are guaranteed. It can be stressful and time consuming to get your car repaired so it pays to find out as much as you can from your insurer before taking out a policy. Will you need to get quotes for the work yourself? How long will the work take? Can you get a rental car while you’re waiting for your car to be repaired? These are all important considerations when choosing an insurer so there are no nasty surprises or hassles come claim time.
Auckland and Hamilton AA Insurance customers are able to take their cars straight to a Customer Service Centre, which is a one-stop-shop for all assessment, quotes, repairs and quality checks. Even if you’re not in these parts of the country your car will still be repaired by a specialist from our Quality Repairer Network, with all work receiving our Lifetime Repair Guarantee. If you’re not an AA Insurance customer you should ask your insurer about their repairers and work guarantees.
So is cheap car insurance really the best?
It’s quite simple to see that there are a number of factors that need to be considered when choosing car insurance. Although some cover options such as Third Party and Third Party, Fire & Theft are cheaper in price, it does not necessarily mean it is the best cover option for you. It is important to take a look at your individual situation to see what benefits best suit you, and what you can’t do without. Take the time to discuss your options with your insurer so you can make a well informed decision about your car insurance. Remember, cheap isn’t always best.
Reducing the cost of insurance
Apart from choosing Third Party insurance, or Third Party, Fire and Theft, there are other ways you can reduce your car insurance premium. If you have a Comprehensive policy you could choose to exclude benefits, such as rental car cover, or Excess-Free Glass Cover, in exchange for a lower premium.
An excess is the amount you must pay towards a claim for each event that occurs and is covered by your policy. So, if you make a claim, you will need to pay an excess in order to begin the claim process. Remember, you will only need to pay your excess if you make a claim, unless of course the accident wasn’t your fault and you can identify whose fault it was. In this instance you may not have to pay any excess.
You should also be aware that the type of car you drive will affect your premium. Our claims data tells us how often each vehicle type is involved in a claim, and how much that claim costs. The majority of claims involve repairs; the minority involve theft. Our data shows that some cars are involved in accidents more often than others, while some are stolen more often than others. These can be attributed to the driver as well as the type of vehicle they choose to drive. Based on this information, which is constantly refined, we can calculate an individual’s vehicle insurance premium.
For more ways on how to save on your car insurance refer to our car insurance FAQs.