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What is Vehicle Insurance, and Why Do You Need it?

What is vehicle insurance – Wing mirror showing the reflection of a passenger’s feet out of the window

So, you’ve just driven your new NZ car off the lot; congratulations, it’s all yours! But as you embark on your journey, it’s important to acknowledge the responsibilities that come with your fresh set of wheels. The moment you drive off the lot, your car becomes vulnerable to various risks, including reckless drivers and other potential hazards.

While you won’t be able to protect your car from everything, you can prepare for when disaster strikes with vehicle insurance. Buckle up as we dive into what vehicle insurance is, how it works, and why you need it!

How Vehicle Insurance Works

You’ll hear it from your Mother, your Father, and most likely from the person selling you the car – you need to buy vehicle insurance! But what is vehicle insurance?  

Vehicle insurance is an annual agreement between you and your insurance company. You pay yearly premiums and excess fees when it’s time to make a claim. And the insurance company pays for damages when you make a claim up to your policy’s limit. It’s a win/win for everyone involved!

What are Premiums and Excess?

A premium is a sum you fork over fortnightly, monthly, or yearly to your insurance provider. Think of it as an insurance membership keeping your policy alive and kicking. An excess is a contribution you pay when your car needs fixing before your insurance provider steps in and covers the rest.

These figures are flexible; you’ll have a little wiggle room to negotiate. You can embrace a bit more risk by opting for lower premiums and higher excess. However, you’ll want to ensure that when it comes time to pay, you can do so.

How Much is Your Car Worth?

While your car might be worth the world to you, insurance companies won’t share that same valuation. When getting vehicle insurance, you will negotiate an agreed or market value: the amount you’ll be paid if your car is a write-off or stolen.

  • Agreed Value: This is the maximum amount your insurer will pay for your vehicle in case of total loss or theft. This value is determined when you purchase insurance and is reviewed annually upon renewal.
  • Market Value: This refers to your car’s retail worth just before it was stolen or damaged. An independent registered valuer will assess it, considering the vehicle’s condition, make, model, age, mileage, maintenance, and damage.
What is vehicle insurance - A man driving his car

Types of Vehicle Insurance

When purchasing an insurance policy in New Zealand, it’s crucial to understand the available covers. Your choice of coverage impacts the types of claims covered, premium payments, and claim settlement.

Comprehensive Coverage

As the name would suggest, comprehensive coverage is perfect for those after full protection. With this type of coverage, you can have peace of mind knowing that you have mitigated a wide range of risks. In addition to covering damages resulting from accidents, comprehensive coverage protects against theft, vandalism, fire, and natural disasters.

Third Party, Fire, & Theft

Third Party, Fire & Theft policies ensure coverage for damages to other people’s cars or property you caused. However, it does not cover damage to your vehicle unless it has been stolen or damaged by fire.


Third-Party insurance covers damage caused to someone else’s car or property in an accident. However, it does not cover any damage to your car. If you are looking for an affordable option or your car’s value is low, consider opting for third-party insurance.

Importance of Vehicle Insurance

While the “she’ll be right” attitude has taken us Kiwis far, it’s better to be safe than sorry when it comes to our cars. Above all else, vehicle insurance provides peace of mind, protecting you and your car against sudden, unforeseen, and unintended damage or loss. Depending on your level of cover, this can include anything from theft and damage to your car to any damage you might cause to someone else’s. Drive confidently, knowing that your insurance has got you covered.

Make Peace of Mind a Priority

Vehicle insurance may not be mandatory in New Zealand, but to save yourself and your wallet a lot of hassle, it’s always a good idea to have it and understand what vehicle insurance is. Whether you’ve bought a brand-new convertible car or a cheap runaround, there’s an insurance policy to match your needs. But you’ll need a car before you get into the nitty gritty of insurance policies! Head to Portage Cars and browse our extensive selection of new and used cars online today. 


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