car insurance

Car insurance explained

Car insurance can be confusing, but it doesn't have to be.

Car insurance is designed to provide you with financial protection in case of accidents, theft, or other unexpected events involving your vehicle. Having car insurance is not compulsory in New Zealand, but there are a number of reasons why you should think about having it.

Here we’ve provided an explanation and things you need to know about car insurance.

man thinking about car insurance

Types of car insurance and what they protect

  • Third party – The least expensive cover type. It covers damage to someone else’s car or property caused by your car, but does not cover damage to your own car.
  • Third party, fire and theft – This type of insurance covers damage to someone else’s car or property, as well as protection if your car is stolen or catches fire.
  • Comprehensive – This is the most extensive cover option, and if you take out a car loan, you’ll need to have this level of insurance. It covers damage to your own car, as well as damage to someone else’s car or property, theft and fire damage. It often includes (or, you may be able to purchase) additional benefits like roadside assistance and windscreen repair or replacement. You can choose to insure your car for either, ‘Agreed Value’ – You and your insurer will come to an agreed value when you first take out the insurance (it’s the maximum amount your insurer will pay for your vehicle, and is adjusted each time it renews). Or, ‘Market Value’ – What your vehicle is worth just before it is damaged or stolen.

Optional extras

In addition to the basic cover options, you can often buy optional extras, such as:

  • Excess reduction – You can choose to pay a higher premium which will reduce the amount you need to pay as an excess if you need to make a claim.
  • No claims bonus – This is a discount off the premium that your insurer may offer if you haven’t made any claims over a period of time.

man with laptop thinking about car insurance options

Other optional products to consider

  • Mechanical Breakdown Insurance (MBI) – Insurance that covers repair or replacement of major mechanical and electrical components of your vehicle if they breakdown. MBI is designed to protect you from unexpected and costly repair bills that are not covered with standard car insurance.
  • Guaranteed Asset Protection (GAP) – Is designed to pay the shortfall between the balance still owing on your car loan, and the amount your insurance company gives you for your car if it is written off.
  • Payment Protection Insurance (PPI) – This insurance is designed to provide financial protection if you have a car loan and are unable to make your loan repayments due to reasons such as illness, injury, job loss or other unforeseen events.
  • Payment Waiver – An optional product offered by Oxford Finance that you can purchase at the time you take out a car loan. Aimed to protect you against unforeseen events such as redundancy, serious illness or death. It is included in your loan repayments and will clear the balance of your loan depending on the level of covered events you choose. Find out more about Payment Waiver.

man in moon boot working on laptop at home


A premium is the cost you pay to have your car insured. You can choose to pay your premium fortnightly, monthly or yearly. The cost of car insurance premiums depends on various factors, including your age, driving history, the type of cover you choose, the type and value of your vehicle, and where you live.


Excess is the amount you must contribute towards a claim before the insurance company covers the rest.

Claims process

If you need to make a claim, contact your insurance company as soon as possible. Remember to take notes of names, addresses, contact numbers, car regos, and drivers licence details of other drives involved in the accident. If your car has been stolen, you’ll need to contact the police and provide the police report to your insurer.

lady talking to insurance company about car accident

Penalties for uninsured vehicles

While car insurance isn’t mandatory, many finance companies, including Oxford Finance, will have comprehensive car insurance listed as a condition of the loan agreement. There can also be financial risks for driving without insurance if you’re found at fault in an accident. You may be responsible for covering the cost of damage to the other drivers’ car, not to mention your own car.

It’s important to carefully review insurance options, shop around for quotes from different providers, and choose the policy that best suits your needs and budget. Always look closely at what’s covered and what’s not, so you can make the right choice and avoid having any surprises if you need to make a claim.

If you’re thinking about car finance and want to know what your repayments may be, check out our loan calculator. Alternatively, if you have any questions around applying for finance or insurance please get in touch with the friendly team at Oxford Finance, we’re here to help.