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Car insurance exclusions
Know what your car insurance policy will and won't cover before you hit the road.
No matter what type of insurance you’re looking for, it’s important to be aware of the situations and circumstances which your policy simply will not cover. So if you’re shopping around for a car insurance policy, you’ll need to check the list of general exclusions in the PDS to find out when future claims will be rejected.
What car insurance exclusions should you be aware of? Read on to find out.
Common car insurance exclusions
It’s not unusual for the list of general exclusions to take up a few pages or more of your car insurance PDS. But while the size of the list may seem a little overwhelming at first, many of those exclusions are simply common sense. If you’re a safe and responsible road user, most of them won’t ever cause you any problems.
Here are 13 important car insurance exclusions you should be aware of before hitting the road.
1. Driving while under the influence of alcohol or drugs
Yep, it’s hardly surprising that this is excluded from cover. No insurer, regardless of how big its appetite for risk, will cover you if you get behind the wheel with drugs or alcohol in your system.
It’s worth pointing out that this exclusion also applies to prescription medications that have a significant impact on your reactions or thought processes.
And don’t think you can get away with it by refusing to take a test to check for drugs, alcohol or medication in your blood, as this will also cause any related claims to be rejected.
2. Driving a car that isn’t roadworthy
When you take out car insurance cover, one of your obligations under the insurance contract is to keep your car in good condition. This means it needs to be well maintained, roadworthy and safe to drive.
With this in mind, it’s essential to:
- Replace old, worn-out tyres
- Replace broken or defective lights
- Replace worn-out brakes
- Repair any major rust problems
- Fix worn upholstery
- Repair major scratches and dents you do not claim under your policy
For more information on your obligations under your policy, check out the ‘Your car insurance responsibilities’ section further down this page.
3. Modifying your car (without telling your insurer)
Although the approach to modifications does differ slightly between insurers, it’s always a good idea to get your insurer’s approval before making any changes to your vehicle. Any alterations to the standard body, engine, suspension, wheels or paintwork of your car that have an effect on its performance, safety levels, appearance or value may influence your insurer’s decision about whether or not to cover you, so you’ll need to get their OK first.
Once you make any unauthorised changes to your car, it becomes a different vehicle to the one your insurer originally agreed to cover. So if you don’t tell your insurer about any mods you’re planning, future claims could be refused.
4. Restricted drivers
When you apply for car insurance, most insurers give you the option to restrict cover to drivers above a certain minimum age. This minimum age limit is usually 25 years, but some providers also give you the opportunity to only cover drivers over 30 years of age or potentially even older.
Selecting the restricted driver option is a great way to cut down on premiums, but it could be a costly decision if you ever need a younger driver to get behind the wheel of your car. So before you tick the box to choose this option, think about whether you’ll be likely to ever need a friend or family member under the age of 25 to drive your car.
If you select this option and your car is being driven by someone under 25 at the time of an incident, don’t expect your claim to be paid.
5. Unlicensed drivers and unregistered vehicles
If you don’t have a valid licence when you get behind the wheel of your car, don’t expect your insurer to cover you for any incidents that may occur. This exclusion also applies if you have failed to renew your licence in time, or if you’re in control of a vehicle you’re not licensed to drive. So make sure you regularly check your licence expiry date and check any terms and conditions that may be attached before hitting the road.
Another item listed in the car insurance general exclusions is no cover if you drive your vehicle while it is unregistered. Forgetting to renew your rego is an easy mistake to make, particularly now that physical rego stickers are a thing of the past, so make sure you’ve got all the proper documentation and made the necessary payment to be sure of maintaining cover.
6. Driving your car while it is overloaded
It shouldn’t come as any surprise to find out that driving your car while it’s overloaded is a dangerous and also illegal practice, and is therefore excluded from car insurance cover. The overloading exclusion applies to the following scenarios:
- Carrying more passengers than the car was designed for
- Carrying more passengers than the car is permitted to carry by law
- Carrying any load which is not properly secured according to law
- Carrying any load that is over the legal limit
- Carrying any load that is more than your car is designed to carry or tow
Take special note of the towing exclusion in the last dot point. If you’re planning on towing a trailer or caravan, check your car manufacturer’s specifications to find out how much your vehicle can safely tow.
7. Damaged tyres and tyre damage
This is one common exclusion that many New Zealand drivers are unaware of, but it’s important to consider before you hit the road. The minimum legal tyre tread depth in New Zealand is 1.5mm – replacing your tyres before they get to this point is a critical safety measure.
Driving on worn-out tyres is dangerous and should never be done. And if you have an accident while your car is fitted with tyres that don’t meet the minimum safety requirements, your claim may not be approved.
While we’re on the subject of tyres, car insurance also won’t provide any cover for tyre damage caused by:
- Wear and tear
- Punctures, cuts or bursts
With this in mind, there’s even more reason to regularly check the tread and overall condition of your tyres before getting behind the wheel.
8. General wear and tear or gradual deterioration
Following on from the above exclusion, comprehensive car insurance won’t cover any claims that arise due to gradual deterioration or general wear and tear to parts of your vehicle. Insurance policies are designed to provide financial protection against unexpected events and mishaps, not against the general ageing and deterioration of your vehicle that occurs naturally with regular use.
This means you won’t be covered for claims caused by:
- Wear and tear
- Rust or corrosion
So instead of relying on your car insurer to cover every single little thing that could eventually wear down on your vehicle, it’s your responsibility to stay on top of ongoing maintenance and any minor repair requirements as they arise.
9. Legal confiscation or repossession of your car
Has your lead foot finally come back to haunt you and caused the authorities to confiscate your car after yet another speeding ticket? Did you list your vehicle as collateral for a car loan and then have it repossessed when you defaulted on your repayments?
In either of the above scenarios, don’t expect any financial assistance from your car insurer. Whenever your car is legally repossessed or confiscated, or even if it is lawfully destroyed by the authorities, no cover is available under your comprehensive car insurance policy. This exclusion also applies to any personal items or possessions that are carried in your vehicle and legally confiscated or repossessed.
10. Mechanical or electrical breakdown
You’re on a country road in the middle of nowhere when your car’s ancient timing belt finally gives way or its computer infotainment system suffers a catastrophic failure. No worries – you’ll be covered for the cost of the resulting repairs by your car insurance, right?
Wrong. Comprehensive insurance covers you for loss or damage caused by a number of defined events, such as accidents, storms, fire, theft and vandalism, but it doesn’t cover you if your car breaks down. Instead, you’ll find protection for most mechanical failures on new cars under the manufacturer’s warranty and the Consumer Guarantees Act.
While the wording may differ slightly from one policy to the next, most insurers will exclude claims that arise due to any structural, mechanical, electrical or electronic failure or breakdown.
However, if you’ve selected a roadside assistance option as part of your policy, you may be able to access minor breakdown-related repairs and emergency towing services.
11. Motor sports or reckless acts
Do you feel the need? The need for speed? Sorry, Maverick, but indulging in your desire to go fast could cause any resulting car insurance claims to be rejected.
Car insurance will not provide cover if you participate in any kind of motor sport, such as:
- On a permanent or temporary racetrack
- In a four-wheel drive adventure park
- For racing
- For trials, speed tests, rallies, contests or hill climbs
- For endurance or skills tests.
Unsurprisingly, you also won’t be covered if your claim arises because you were participating in street racing, or driving recklessly (donuts, burnouts and the like). So it might be time to put your need for speed to one side and focus on your need to drive safely and maintain your car insurance cover.
12. Hiring out your car
‘Renting’ your car to a friend for a couple of months while their vehicle is off the road? Driving for a rideshare service like Uber and using your car to earn some extra money?
In both of the above scenarios, if your car was damaged by an insured event your claim would be rejected. All comprehensive car insurers exclude claims that arise because your car was being used for hire, fare or monetary reward.
However, the good news is that car pooling arrangements are usually covered. And if you’re planning on becoming an Uber driver, check out our guide to rideshare car insurance to find out how to get the cover you need.
13. Not paying your premiums
This is another exclusion that should be obvious but is worth mentioning nonetheless. If you don’t pay your car insurance premiums on time, your policy will lapse.
This can be a pretty easy mistake to make. An expensive car insurance renewal is hardly a welcome arrival in anyone’s mailbox, but the decision to put it aside to “deal with later” could come back to haunt you.
Do whatever you have to do to make sure you remember to pay your annual renewal on time or, if you pay by the month, consider setting up an automatic direct debit so you never forget.
Don’t be left in the dark – compare car insurance cover
What else isn’t covered?
The situations listed above are only some of the events and circumstances that comprehensive car insurance won’t cover. There are plenty of other exclusions that apply, such as:
- No cover for loss or damage that occurs outside New Zealand
- No cover for intentional loss or damage caused by you, or by someone else acting with your consent
- No cover for loss or damage that arises due to revolution or war
- No cover for the cost of repairing old damage
- No cover for loss of value or depreciation of the car due to it being damaged and then repaired
- No cover for unauthorised repairs
- No cover if you accidentally use the wrong fuel or lubricant for your vehicle
- No cover when your car is being used to transport dangerous, hazardous or poisonous goods
- No cover if the driver of your vehicle leaves the scene of an accident when they are required by law to stay at the scene
- No cover for liability due to the death or bodily injury of any person
- No cover for consequential loss of any kind, such as loss of income or wages, losses related to stress or anxiety, or medical expenses
- No cover if you drive your car after it has been damaged in an incident (unless you were not reasonably aware that this could lead to further damage
- No cover if you fail to take reasonable precautions to prevent any loss, damage or liability occurring
- No cover for the replacement of non-damaged parts, including when those parts belong to a set (for example, if two of your set of four alloy wheels are damaged, your policy will only cover the cost of replacing the two damaged items, not the whole set)
- No cover if you don’t accompany your car when it is up for private sale and taken for a test drive
- No cover if your car is used for any unlawful purposes
Your duty of disclosure when applying for car insurance
One of the first pieces of information you see when reading a car insurance PDS is details of your duty of disclosure. This section refers to your responsibility to tell the insurer of anything you know, or could reasonably be expected to know, that could be relevant to the insurer’s decision about whether or not to cover you and your vehicle.
What does this mean for you? When you’re applying for cover and the insurer asks all those questions about you, your car, your driving history and a range of other factors, you must tell the truth.
If you’re dishonest in your application or if you conveniently ”forget” to mention any important details, any claims you make in the future could be reduced or refused. In some cases, the insurer may even cancel your policy altogether.
So if you’re thinking of leaving out details of a couple of previous insurance claims or “forgetting” to list a driver under the age of 25, think again. While it might help you achieve a lower premium in the short-term, the long-term financial consequences can be severe.
Remember that this duty of disclosure also applies when you renew your policy. Unless you inform your insurer of any changes that may have occurred, it will assume that there have been no changes to any circumstances that could affect your cover.
Your car insurance responsibilities
When you take out car insurance cover, you agree to meet certain obligations under the insurance contract. If you fail to meet those responsibilities, your policy could be voided.
To ensure that you will always be covered by your policy you must:
- Take all reasonable precautions to prevent damage or theft. If you leave your car unlocked, unattended and with the keys in the ignition in a busy public car park, don’t expect an insurer to pay your claim. So lock your car and close the windows when it’s unattended, remove the keys from the ignition, accompany anyone who takes your car for a test drive when you’re selling it, and avoid dangerous situations like rising floodwaters.
- Keep your car in good condition. It’s your responsibility to make sure your vehicle is well maintained and kept in a roadworthy condition. Replace worn-out tyres with new ones, replace broken brake lights, fix major rust issues and repair any scratches and dents you don’t claim on your policy.
- Service your car regularly. You’ll need to make sure that your car receives regular servicing at the manufacturer’s recommended service intervals. Keeping records of each service will also come in handy if you ever need to claim for mechanical damage that arises because of an incident covered by your policy.
- Co-operate at claims time. You also have a responsibility to provide honest and complete information when you make a claim, and to provide any documentation the insurer requests to support your claim.
If you don’t meet any of these responsibilities, the insurer can pursue either or both of the following options:
- Reduce or refuse your claim
- Cancel your policy
And if you’re guilty of fraud, the insurer is well within its rights to treat your policy as if it never existed.
The sheer length of the list of general exclusions from most car insurance policies can seem a bit overwhelming at first, but the reality is that most of them are commonsense and can be easily avoided. If you stick to the road rules and abide by the terms and conditions outlined in your policy, you shouldn’t have any trouble accessing the cover you need if you ever have to make a claim.
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