Borrowing a Mates Car: Whose No-Claims Bonus is at Risk in 2026?
Kiwi culture is built on "lending a hand," which often extends to lending a car. Whether it’s helping a mate move house or taking turns on a long road trip to the Coromandel, we rarely think twice about handing over the keys. However, as insurance premiums continue to climb across Aotearoa, the "social cost" of a simple favour has never been higher.
Many New Zealanders incorrectly assume that if they crash a friend's car, their own insurance policy will cover the damage. At Quashed, our research shows a significant gap in consumer understanding regarding the risk associated with this—the reality is that in New Zealand, insurance follows the vehicle, not the driver.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Insurance terms and coverage options vary significantly between different providers and individual agreements. You should always consult your specific policy wording and clarify any questions directly with your insurer if you are unclear about your coverage or obligations.
Step 1: How Car Insurance Works When Borrowing a Vehicle in NZ
The Issue
A common mistake Kiwis make is believing their personal "Comprehensive" policy acts like a portable license that protects them regardless of what vehicle they are driving.
The Data
In the New Zealand market, the insurance contract is tied to the vehicle, not the person behind the wheel. If you borrow a car and cause a collision, the owner’s insurer handles the claim. The owner is responsible for the excess, and the accident is recorded against their claims history, regardless of who was in the driver's seat.
The Lesson
Always confirm "Open Driver" status. Before you drive, ask the owner if their policy is restricted to "Named Drivers Only." Some insurers offer lower premiums if only specific people are listed on the policy; if you aren't one of them, you are effectively driving uninsured, leaving the owner to foot the entire bill if things go wrong.
Step 2: NZ Insurance: Driving Other Cars (DOC) Extensions Explained
The Issue
A common misconception in New Zealand is that "Full Cover" follows the driver. Many believe that because they have a Comprehensive policy on their own car, that "full" protection extends to any car they drive.
The Data
In reality, standard NZ Comprehensive policies are designed to cover the specific vehicle listed on the policy schedule. While some include a Liability Extension for borrowed cars, this only covers your legal liability for damage to other people's property (like a fence or another car). It does not provide accidental damage cover for the vehicle you are currently driving. If you crash a friend's car, your insurance might pay for the property you hit, but it will not pay for the repairs to your friend's vehicle.
The Lesson
Don't assume—verify. If you crash a friend's car and they are uninsured, your comprehensive policy may prevent you from being sued by third parties for millions. However, it will not cover damage to your friend's car. Always verify that the vehicle you are borrowing is comprehensively insured and that you are an eligible driver under that specific policy.
Step 3: Does My No-Claims Bonus (NCB) Cover Other Drivers?
The Issue
Most borrowers don't realise that a single "at-fault" accident can instantly wipe out years of a friend's hard-earned No-Claims Bonus (NCB).
The Data
The No-Claims Bonus is a significant discount rewarded to the policyholder for years of claim-free driving. When a claim is made on a vehicle—even by a borrower—that bonus is typically reduced or reset. This results in a direct premium hike for the owner at their next renewal. Even if they have "NCB Protection," this usually only protects the discount for one incident, meaning the "safety net" is gone for the rest of the year.
The Lesson
Recognise the "Social Debt." If you cause an accident, you aren't just responsible for the immediate excess; you may be costing your friend hundreds of dollars in lost discounts for the next several years. If you borrow a car, you should be prepared to compensate the owner for the long-term increase in their insurance costs.
Step 4: Understanding Underage and Inexperienced Driver Excess
The Issue
Borrowers and owners often forget that the "Excess" (the out-of-pocket cost paid at the time of a claim) is not a fixed fee. It scales based on the risk profile of the person driving.
The Data
Most NZ policies include a "Standard Excess," but additional "Special Excesses" apply depending on the driver. If an owner lends their car to a friend under 25, or someone who has held their license for less than two years, the insurer may apply an "Underage" or "Inexperienced" driver excess. These can be cumulative, meaning the total out-of-pocket cost can easily triple the standard amount. We ran a market scan for a 2005 Toyota Corolla, below is a summary of the excesses under comprehensive coverage:
Insurer | Cover for Under 21s | Listed Young Driver Excess (<25) | Unlisted Young Driver Excess (<25) | Inexperienced Driver Excess | Non-NZ Licensed Driver Excess |
Cove | No cover | Applies | No cover under 21 | Applies | Applies |
Assurant | Available | Applies | Applies | Applies | Applies |
AMP | Available | Applies | Applies | Applies | Does not apply |
Provident | Available | Applies | Based on "Open Driver Range" | Does not apply | May apply |
Tower | Available | Applies | Applies | Applies | Applies (select countries) |
Trade Me | Available | Applies | Applies | Applies | Does not apply |
The Lesson
Ask for the specific excess figure. Before you pull out of the driveway, check the policy's summary. If you cannot afford to pay the combined standard and underage excess in cash today, you should not be driving that vehicle. Run a Quashed market scan with your unique profile today to check excesses today.
Step 5: How a Friend’s Accident Affects Your Insurance History
The Issue
The owner of the car is required to disclose the accident on every insurance application or renewal for the next five years, regardless of who was driving at the time.
The Data
When the owner uses the Quashed Market Scan to find a better deal, they must answer "Yes" to whether a claim has been made on any policy they held. Insurers view claims as a measure of risk; a claim caused by a friend can make the owner look like a "higher risk" client, leading to higher quotes or restricted cover options across the entire market.
For the same 2005 Toyota Corolla profile in step 4, premiums for comprehensive increased on average $263.93 per year after declaring a recent at fault incident. That is a massive 24.18% jump. Below is a detailed table showing the impact of a recent incident on premiums per provider:
Insurance Provider | Price (No Accident) | Price (With Accident) | Increase ($) | Increase (%) |
AMP | $993.64 | $1,050.18 | +$56.54 | +5.7% |
Cove | $566.56 | $630.61 | +$64.05 | +11.3% |
Provident | $955.04 | $1,212.51 | +$257.47 | +27.0% |
Trade Me | $1,300.09 | $1,779.19 | +$479.10 | +36.9% |
Tower | $1,155.78 | $1,618.29 | +$462.51 | +40.0% |
The Lesson
Transparency is mandatory. If you are the owner, you must weigh the risk of your future "insurability" against the favour you are doing. An incident caused by a mate can lead to years of higher premiums for you.
Final Verdict: Balancing Friendship with Financial Reality
Lending your car remains a fundamental Kiwi gesture, but in 2026, it must be done with open eyes. With average premiums across New Zealand on the rise, particularly in major urban centres, the financial stakes are high. When you hand over your keys, you aren't just lending an asset; you are entrusting your friend with your No-Claims Bonus, your claims history, and your future premiums.
The best way to protect both your friendship and your finances is to ensure your policy is correctly optimised for occasional drivers at the best possible price. Transparency between friends regarding who pays the excess—and the potential premium hike—before the engine starts is a solid way to avoid a "favour" turning into a long-term financial burden. Run a Quashed market scan to see policies and check prices today!
Related Reading
To help you better navigate the complexities of the New Zealand insurance market, we have curated a selection of guides designed to save you money and improve your coverage:
Getting the Best Deal? Read this Contents Insurance Comparison Guide by Quashed (2025): A comprehensive breakdown of what to look for when evaluating different contents policies to ensure you aren't missing critical details.
Contents Insurance 2025 Quashed Hacks: Get Maximum Cover for Minimum Price: Strategies for balancing low premiums with high-quality protection so you get the best value for your dollar.
Overspending on Contents Insurance? Leave that Thought Quashed With Our 2025 Guide.: Practical tips and "industry secrets" to reduce your annual insurance costs without sacrificing necessary coverage.
Contents Insurance - Sum Insured & Excess Decoded by Quashed 2025: Expert advice on setting your policy limits and out-of-pocket costs to match your specific risk profile and budget.
Tower Insurance 2026: Quashed Ultimate Kiwi Review: An in-depth look at Tower's offerings, helping you decide if their policies align with your needs as a New Zealand driver.
FAQs
1. Who pays the premium hike if a claim is made while I'm borrowing a car?
In NZ, the insurance is tied to the vehicle, meaning the owner’s policy handles the claim. This typically results in a premium increase and a reduced No-Claims Bonus for the owner, not the borrower.
2. Is it possible for the car owner's insurance record to be affected for five years?
Yes. Owners must disclose any accidents on insurance applications and renewals for at least five years, regardless of who was driving at the time of the crash. This disclosure can lead to higher quotes or restricted cover options across different insurers.
3. Does "Open Driver" cover mean anyone can drive?
Not necessarily. Most "Open Driver" policies have age or license restrictions, such as "Any driver over 25 with a full NZ license." You should check your specific policy wording and contact your insurer if you are unclear.
4. Does the "Driving Other Cars" extension cover damage to the car I'm driving?
No. Standard liability extensions in NZ only cover your legal liability for damage to other people's property, such as another vehicle or a fence. It does not provide any cover for accidental damage to the borrowed vehicle itself.
5. Can I borrow a car if I only have a Learner's or Restricted license?
You can, but the owner's policy must allow it. Owners should be aware that "Inexperienced" driver excesses will likely apply, which can significantly increase the cost of a claim
6. What is the best way to handle the excess if a friend crashes my car?
It is highly recommended to agree on who pays the excess before the engine starts. Since the owner is legally responsible for the excess to the insurer, having a clear agreement that the borrower will cover this cost in cash is essential.
