Choosing the Right Amount of Car Insurance Coverage

Saturday, May 19, 2018, 6:00 PM | Leave Comment

Many people aren’t particularly interested in details when they’re purchasing car insurance, and they see it as just another expense which sucks money from their wallets on a monthly basis.

It’s true that car insurance, just like any other type of insurance, seems like something that you only waste your money on without getting anything in return, but people change their mind when something bad happens and they realize that they don’t have to pay a hefty amount of money in order to fix their (or somebody else’s) car.

If properly selected, car insurance can be a real lifesaver, so here are some of the most important aspects that you should take into consideration when you’re making a decision about your insurance package.

Choosing the Right Amount of Car Insurance Coverage

  • Types of car insurance policies

    There are several types of car insurance policies, and the most common ones are comprehensive insurance, uninsured motorist extension, third-party fire and theft car insurance, third-party car insurance, and specialized car insurance.

    Comprehensive car insurance is the most expensive insurance type, but if you opt for it, you’re completely protected against any damage that you cause.

    Third-party fire and theft car insurance will have you covered if your car is stolen or damaged in a car fire. Third-party insurance is the most affordable, and as such the most popular insurance.

    Specialised car insurance is a good solution for cars older than 25 years, and you’ll get the same coverage as under comprehensive insurance, but you need to stick to the mileage predetermined in your policy.

    If you’re looking for the best quotes, check out a Youi NZ review and see which offer fits you best.

  • Comprehensive insurance

    Before you decide to go for the minimum coverage amount, you need to factor in a couple of things.

    First of all, identify your net worth because it plays a significant role in your decision-making process. Simply see how much money you have across all your accounts, and include any stocks, shares, as well as the value of your house.

    After that, calculate how much you owe, and subtract that amount from the money you own. Your net worth is exactly the amount your car insurance should cover because if your net worth is high, and your insurance is low, then another driver will be more likely to sue you in order to cover their expenses.

    That’s why comprehensive insurance is the best option if you have a lot of assets. It will pay for any damages to your and the other driver’s car if you’re responsible for the accident, and this will protect you from any potential legal issues.

  • Uninsured motorist extension

    As you know it’s not compulsory to have car insurance in New Zealand, and although 92.4% of vehicle owners have some kind of insurance, it’s a good idea to have uninsured motorist extension, especially if you don’t have a comprehensive insurance package.

    This way you will make sure that the insurance company will pay for the expenses if an uninsured driver damages your car.

    Even if you’re holding a comprehensive insurance policy, there’s no need to risk your no-claim bonus, so it’s a good idea to have uninsured motorist extension.

    Most UME coverage vary between $2,000 and $4,000, and in case that you can’t identify the person responsible for the accident, you’ll have to pay for all the expenses which exceed the previously mentioned amount.

  • Third-party insurance

    If your car is old or if it’s value is low, then third-party insurance may be a good solution for you. The premiums are low, but you should bear in mind that this insurance will cover only the damages that you cause to another vehicle, while you have to foot the bill for any repairs on your car from your own wallet.

    That’s why this insurance isn’t suitable for expensive, new cars, as it’s much more expensive to repair them which makes paying for comprehensive insurance worthwhile in that case.

    When it comes to the costs resulting from injuries, third-party insurance in New Zealand doesn’t have to cover them because they’re managed by Accident Compensation Corporation, which is funded by the money from your car registration fee, as well as, by the petrol tax.

There’s no one-size-fits-all solution to choosing the right amount of your car insurance coverage, so make sure to assess your situation and decide based on the relevant information we provided you with.

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