Car insurance is the most commonly purchased insurance in New Zealand. An estimated 80-90% of cars on New Zealand roads are thought to be insured. Most of us will have been exposed to car insurance as young as 16, or 15 back in the day when the driving age was lower, when our parents will have made sure that their vehicle was insured before we were let loose on it. 

A question that most of us will have when purchasing car insurance is - should I be buying Third Party or Comprehensive cover? We cover off in the article the key differences between Third Party and Comprehensive car insurance, the price difference between these two covers, and whether one is better than the other for you. We'll also take a look at Third Party Fire & Theft cover.

What is Comprehensive car insurance 

As its name suggest, it provides the most "comprehensive" cover for your car offered by the insurer. Mostly, this means that if you get into an accident, the insurance policy covers the damage that is caused to the other party's car AND also covers the damage to your own car. You are protected whether the accident is your fault or not but if you are at fault, you will have to pay the excess on your policy. 

There are usually a number of other benefits included into the Comprehensive cover that makes it well, comprehensive. Common benefits include things such as protection against having your car keys stolen or if you lose them, new vehicle car replacement within a certain period, accommodation cover if you're out of town and stranded after an accident, damages to your trailer, and/or your child car seat. Other benefits we have seen include death/medical cover. For example, Tower's Comprehensive policy includes a death cover of $5,000 while State insurance offers $500 for medical cover. While having these benefits are great, it is more important and useful to know that you have these benefits so that you can make a claim if one of these events happen. For example, in the event that you lose or have your car keys stolen, instead of paying up for it yourself (can cost upwards of $500 for some cars), you can have your insurer pay for it.

What is Third Party car insurance

With Third Party car insurance, it offers a lower level of cover. The key protection being against the cost to replace or repair someone else's car if you are in an accident. This is where you will have heard horror stories about crashing into an expensive Mercedes or BMW which could be over $100,000+ and the financial damages that will cause the driver to be in debt for a long time. This cover does not protect your own car i.e. if you get into an accident, the damages to your car will not be paid for by your insurance. There is one exception - the Innocent Party Protection benefit which many Third Party policy offers. This means that if you are in an accident and it was not caused by you as determined by the insurer, and the other party is uninsured, then you may be able to claim up to the limit offered by the policy. Most that we've seen provides between $3,000 - $4,000 under this benefit. AA and Tower's limit is $4,000 and AMI and State is $3,000. 

Key differences between Third Party vs Comprehensive car insurance

To recap, the most obvious difference between a Comprehensive vs Third Party from the point of protection is cover for your own vehicle. Comprehensive insurance covers your own vehicle while Third Party does not. Price is another key difference as you would expect. In our scan comparing the same vehicle between Third Party and Comprehensive cover, we find that generally there is an 80% difference in premiums between 3rd Party vs Comprehensive car insurance. In our test comparison, a Volkswagen Golf driven by a 35 year old male in Auckland insuring their vehicle for $20,000 with a $500 excess brings up the following premiums:

AA Insurance: Comprehensive $948 vs Third Party $218 (23%)

State Insurance: Comprehensive $872 vs Third Party $194 (22%)

Tower Insurance: Comprehensive $1355 vs Third Party $212 (16%)

While the price difference may seem large, if the insured party chose Third Party vs Comprehensive and they were at fault in the accident or if the other party was not insured, the payout in an accident in this case could be the difference $20,000. You would also see that shopping around across different insurance companies can mean quite a difference in pricing for Comprehensive car cover. Every quote is different and influenced by the type and value of car, location and person driving it. While this example may show a near $500 price difference, with Tower costing more, we have seen many examples where Tower has been the cheapest by similar or more compared to some of the other insurers. 

Use Market Scan on Quashed to compare the cost (premiums) and benefits across different insurers for a car insurance policy in one place easily and quickly. You can also store all your existing insurance policies on Quashed so its easy to manage your policies in one place and see how your premiums are changing yearly.

Should I consider Third Party or Comprehensive cover

Most people would generally think about this question by asking themselves if their car was written off in an accident and their insurance did not cover it, will it be a big impact on them i.e. can they afford to purchase another car? For example, if your car was worth $4,000, you may decide that you only want to insure against crashing into an expensive car which may put me in debt for tens and possibly hundreds of thousands of dollars. If your car was written off, you would simply purchase another car, if you were at fault or if the other party was uninsured. This is a common approach to thinking about this question. Typically, people with more expensive cars will choose to insure their vehicle with a Comprehensive policy. Another way to think about this is to ask yourself if you'd like to be covered for the other benefits that come with a Comprehensive policy. This may appeal to some consumers.

What about Third Party Fire & Theft car insurance

This article is incomplete without a mention of Third Party Fire & Theft cover. This is essentially Third Party cover with the added protection and benefit of protecting your car against fire damages and theft. Comprehensive cover will also protect your car against these risks. The cost of this cover will usually sit halfway between the cost of Comprehensive policy and a Third Party policy. Using the same insurance comparison as above, the results are:

AA Insurance: Third Party Fire & Theft $466

State Insurance: Third Party Fire & Theft $488

Tower Insurance: Third Party Fire & Theft $566

Read more about Car Insurance in our Guide to Car Insurance in New Zealand.