The excess (called a deductible in some countries) is the amount you pay towards a claim before your insurer covers the rest. Understanding how excess works is essential to making a sensible car insurance decision in NZ.
What Is a Car Insurance Excess?
When you make a car insurance claim, you pay the excess first — your insurer pays the remainder.
Example:
- Your car is damaged in an accident. Repair cost: $4,500.
- Your excess: $750.
- You pay: $750. Your insurer pays: $3,750.
If your repair cost is less than your excess, there’s no point claiming — you’d pay the full amount yourself. (For a $600 repair with a $750 excess, claiming is pointless and would harm your no-claims discount.)
Types of Excess in NZ Car Insurance
Standard (Base) Excess
Every comprehensive car insurance policy has a standard excess — the minimum you’ll pay on any claim. This is set by the insurer and varies by policy and age of the driver.
Typical NZ standard excesses: $400–$750
Voluntary Excess
Some insurers allow you to choose a higher excess in exchange for a lower premium. This is called a voluntary excess.
Example: If your standard excess is $500, you might choose a $1,000 voluntary excess, reducing your premium by $100–$200/year. Over 5 years without claiming, you save $500–$1,000. If you claim once, you pay an extra $500 on that claim.
The trade-off: higher excess = lower premium, but higher out-of-pocket cost when you claim.
Age-Based Excess
If a driver under 25 (sometimes under 21) drives your car and is involved in an accident, most NZ insurers apply an additional age-related excess — commonly $250–$1,000 on top of the standard excess.
This is a very significant gotcha for parents whose young adult children occasionally drive the family car.
Options:
- Add the young driver as a named driver (may increase base premium but removes or reduces the age excess for named drivers)
- Accept the additional excess as a risk
- Ensure young drivers know about the additional cost
Unnamed Driver Excess
Some policies apply an additional excess if an unnamed driver is driving at the time of an accident. If you regularly lend your car to family or friends, check whether unnamed driver excesses apply and how high they are.
How Excess Affects Your Premium
Higher excess = lower premium. The relationship is roughly:
| Excess Level | Premium Impact |
|---|---|
| $400 (low) | Higher annual premium |
| $750 (medium) | Standard premium |
| $1,500 (high) | ~10–15% lower premium |
| $2,500+ (very high) | ~20–25% lower premium |
Actual savings vary by insurer and vehicle value.
How to Choose the Right Excess
Key questions:
- Could you comfortably pay your excess tomorrow if you had an accident? If not, don’t set it too high.
- How often do you realistically expect to claim? If you’re a careful driver with a safe car, a higher excess + lower premiums is financially rational.
- Is the premium saving worth the risk? Compare: how much do you save per year × how many years before a claim, vs the additional excess cost when you claim.
General guidance:
- Set excess to the maximum you could comfortably pay from savings
- If you’d have to borrow to pay your excess after an accident, lower it
- If you have a $5,000 emergency fund and drive carefully, a $1,500 excess and lower premiums may make sense
Excess When You’re Not At Fault
In a not-at-fault accident (e.g., you’re rear-ended while stationary), you typically still pay your excess upfront. Your insurer then pursues the at-fault party or their insurer for recovery.
If recovery is successful, your excess is returned to you — but this can take months and isn’t always guaranteed (particularly if the other driver is uninsured).
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