Understanding Your Excess: How to Choose the Right Level for Your Car Insurance
Understanding Your Excess: How to Choose the Right Level for Your Car Insurance
When you take out car insurance in New Zealand, one of the key decisions you’ll need to make is the size of your excess. It might seem like a small detail, but it can have a big impact on both your premiums and what you’ll pay if you have an accident. A lower excess means your insurer covers more of the cost when something goes wrong—but you’ll pay a higher premium. A higher excess lowers your premium, but you’ll need to pay more out of pocket if you make a claim. Here’s how to understand how excess works and how to choose the level that suits you best.
What Does “Excess” Mean?
Your excess is the amount you agree to pay towards the cost of a claim. The insurer covers the rest. For example, if your excess is $500 and the repair bill after an accident is $3,000, you’ll pay the first $500 and your insurer will pay the remaining $2,500.
The excess usually applies per claim, and the amount can vary depending on the type of claim. For instance, you might have a different excess for windscreen repairs, theft, or damage caused by an uninsured driver.
Why the Excess Matters
The excess is one of the main tools insurers use to set your premium. The higher your excess, the less risk the insurer takes on—so your premium will be lower. A lower excess means the insurer covers more of the cost, which increases your premium.
Choosing the right excess is about finding the balance between what you can afford to pay regularly and what you could manage to pay if something unexpected happens.
Pros and Cons of High and Low Excess
There’s no one-size-fits-all answer. The right choice depends on your financial situation, your driving habits, and your car.
High excess – lower premium
- You’ll pay less for your insurance each month or year.
- You take on more of the financial risk yourself.
- A good option if you rarely make claims and can afford a larger one-off payment if needed.
Low excess – higher premium
- You’ll pay more for your insurance, but less if you need to make a claim.
- Offers greater peace of mind, especially if you drive frequently, park on busy streets, or own a newer or more valuable car.
- Ideal if you prefer predictable costs and want to avoid a large unexpected bill.
How to Find the Right Level
When deciding on your excess, consider these three questions:
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How much could you comfortably pay if you had to make a claim? If you could easily cover $750 or $1,000 without financial stress, a higher excess might make sense. If that would be difficult, a lower excess could be safer.
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How often have you made claims in the past? If you’ve been claim-free for years, you might benefit from a higher excess and lower premiums. If you’ve had several claims, a lower excess could save you money in the long run.
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Where and how do you drive? If you mostly drive on open roads or motorways, your risk of minor damage is lower. But if you often park on the street in busy areas or drive in city traffic, a lower excess might give you more confidence.
Check the Details
Excess amounts and rules can vary between insurers and policies. Some insurers in New Zealand offer:
- Flexible excess options – you can choose your own level when you take out the policy.
- Reduced excess for certain claims – for example, for windscreen repairs or if you use an approved repairer.
- Additional excesses – such as a young driver excess if someone under 25 drives your car, or an unlisted driver excess if someone not named on the policy causes a crash.
Always read your policy documents carefully so you know when and how your excess applies.
Remember: You Can Adjust It
Your excess isn’t set in stone. You can usually change it if your circumstances change—say, if you buy a new car, move to a different area, or your financial situation improves. It’s a good idea to review your car insurance each year to make sure it still fits your needs.
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In Short: Balance Peace of Mind and Cost
Choosing your excess is about striking the right balance. A low excess offers security but costs more in premiums. A high excess saves you money day to day but means a bigger bill if you need to claim. By considering your budget, driving habits, and comfort with risk, you can find the level that works best for you—and drive with confidence knowing your insurance is set up the right way.
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