By John Grant Here's a guide to help people who are younger than 25 and have a vehicle that they need to insure. Being under 25 presents a challenge but it's one that car insurers will deal with and there are plenty of ways for insurance to be structured. You should expect to pay a higher insurance premium compared with that offered to people over 25, and your excess is likely to be quite a bit higher. However the costs of having insurance protection even under these conditions will be a lot lower that the likely costs and risks of not being insured. Firstly, most insurers are willing to take into account an existing insurance relationship with your parents. If you are living at home and if the car is owned by your parents but is available for your primary use then consider taking the policy in the name of your parents but with you as the principal driver. In this way you should get a lower premium than you would by taking it in your name (and possibly the benefits of existing no-claims-bonuses, and multiple-policy discounts). You will also be starting the process of establishing your own insurance record. This means that when you replace the car and insure the new vehicle in your name, you are usually able to take with you the full insurance discount earned on the previous car. As each insurer has a slightly different policy in this area, it is a good idea to discuss this with them so it is clear how you will be treated.
Options You will need to decide on the type of insurance you are going to take. The choices are:
- Comprehensive - Covers accidental damage to your car and damage to other vehicles or property.
- Third Party fire and theft - Only covers your car for fire or theft as well as damage to other vehicles or property.
- Third Party - Only covers damage to other vehicles or property.
Prices Pricing depends on the risk involved for the insurance company. Therefore a Comprehensive policy is likely to be 2-3 times more expensive than Third Party with fire and theft cover, and Third Party Only cover will be less than half the Third Party fire and theft cover. As a rough guide, insuring a car valued at $5,000 could cost $1,500 per year for a Comprehensive policy, $500 per year for Third party fire and theft cover, and $250 for Third Party Only cover. These are illustrations only. If you do not insure Comprehensively then you are taking the risk on your own car. This means if you have an at-fault accident and your car is a write off then you stand to lose the value of your car plus you will have to pay the policy excess. Another thing to consider is that insurers who are members of the Insurance Council do provide a special cover for Third Party policyholders. This means that your insurer will pay up $3,000 for damage to your car provided you are not at fault and can identify the other at-fault party. Excess If you decide to insure for Third Party Only or Third Party fire and theft, then you should consider not only the price but also the excess that will apply. Insurance companies attempt to maintain lower prices by having a higher excess. For under 21 year olds the excess is likely to be $750 and for 21-25 years the excess will be around $500. An additional excess of another $200 may also apply if you have been licensed to drive for less than 2 years. It is always wise to compare Price and Excess at the same time. For Comprehensive policies it really does pay to shop around. The big choice is market-value or agreed-value. There are pluses and minuses for both options and you should read our earlier article that covers this topic "“ here. Compare Most importantly shop around and use our guide to help you select insurers. If you live in a place like Auckland then expect to pay the most. Provincial centres like Whangarei, Palmerston North or Nelson will be lower reflecting the lower local accident rates. Dunedin and Invercargill are likely to be the least expensive cities for car insurance.