Insurance: options for younger drivers

Personal Injury Insurance In most countries this basic form of insurance is compulsory. It provides cover for any injuries you may cause to other people, but not to their property. In New Zealand this is provided by the ACC and is paid when you pay the annual license  fee on your car. The current fee for a private vehicle is $247.86. Third Party Property Damage This is another basic form of insurance protection and provides cover for damage you may do to other people's property, but in principle does not necessarily cover damage to your own property. Excess amounts (the amount you must contribute to any claim) vary between insurers and tend to be very high for drivers aged under 25 years, so it pays to shop around and compare before you commit to one company. For our 21 year old, the excess at State Insurance is $1,200 per claim. An under 21 driver who has held a license for less than 2 years, could have an excess as high as $1,450 per claim. Most third party policies have now been extended to cover your own vehicle for accidental damage up to $3,000. But this typically only applies where the other party is at fault, where they are uninsured, and you have clearly identified them. (Insured drivers who cause damage obviously have cover for their own vehicle which is why it is not included in basic third-party cover.) Expect to pay somewhere in the order of $170 to $500 in annual premium.  Our reviews showed that for a 1996 Mitsubushi Mirage, annual premiums varied from $170 at State to $411 at AA Insurance. The level of premium charged varies according to a number of factors. For example if the driver had held a license for more than 2 years then the AA Insurance price reduces to $240 and if she had been licensed for over 5 years then AA Insurance would charge $170.00. There are many factors that will influence the premium and they include, years licensed, driving history (accidents and convictions), the type of vehicle you own and its modifications, your previous insurance record, and the level of excess you choose. Third Party Property Damage Fire and Theft This is the same as the basic Third Party cover but extends it for fire and theft risks. Excesses are usually similar, but the premium costs can increase substantially. For our 21 year old female with no previous insurance and driving a Mitsubushi Mirage, the price varied from $450 at State to $585 at AA Insurance when this extended cover was included. Comprehensive This will cover not only the damage to other people's property but also damage to your vehicle as well, and for a wider range of risks. The premiums are particularly expensive in the first few years as you establish a driving record. The premium should reduce each year as 'No Claims Bonuses' come into effect. However in the first year expect to pay something like $1,150. This could reduce to as low as $500 once a full 'No Claims' allowance has been earned. Before you dismiss the Comprehensive option as 'just too expensive' consider an example where the driver has an accident which is her fault, and there is $3,000 in damage to the other vehicle and $2,500 damage to her car. The third-party-only cover will  have cost her $170 in premium, plus she will need to pay $1,200 in excesses, and she will still have the $2,500 in repair costs to her own car. That's a total of $3,870. If she had taken Comprehensive cover then the premium would be $1,150 plus the excess of $1,200 a total of $2,350.  In an at-fault accident of this example, she is better off by $1,520 with the broader cover. No-one plans to have an accident, but they do happen, and proper insurance cover will be the difference between a painful, annoying experience, and an unmitigated financial disaster. Your capacity to bear the financial risks should be a big part of how you choose the type of cover you need. Shop around and look at the options. The cost of insurance reflects the risk of a claim.