Car insurance payments

The amount your insurer offers you for your car can sometimes be lower than what you might expect. Read this guide to understand the different types of car insurance policies and how to avoid surprises. 

Why is it an issue for consumers?

How your car insurance claim amount is determined is different, depending on the type of policy that you have. It’s important you understand the difference in cover available and ensure you have appropriate cover for your needs – see the difference between agreed value and market value cover, below. 

Dispute over Range Rover repairs

Real life examples

Sai’s* payment pain

Sai was seriously injured after a car accident and his car was a total loss. Sai had a sum insured of $26,000 and thought he had an agreed value policy. However, his policy was a market value policy and the insurer’s market valuations showed his car was worth $18,000. The IFSO Scheme investigated the complaint and found that the insurer had not misrepresented the type of policy Sai had. The insurer’s market value assessment of $18,000 was the appropriate claim settlement amount. 

Rawiri’s* Agreed Value shock

Rawiri’s car was damaged after severe flooding in Auckland and was a total loss. Rawiri had an agreed value policy and expected he would receive a claim settlement of $19,000 – this was the amount he had arranged the insurance for a year earlier. However, a month before the flood, the insurer had renewed the policy and listed the car’s agreed value as $14,400. This was a 24% reduction in the agreed value. The IFSO Scheme said this was an unusually high reduction in agreed value over one year. It said the insurer should have alerted Rawiri to the high decrease, in addition to having it listed on page 3 of the policy schedule. The insurer and Rawiri agreed to settle the claim for $17,500. 

*Names have been changed

See more vehicle insurance case studies

Things to know about car insurance payments

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  1. Key steps in assessing a car claim

    You can expect the following to occur:

    • The loss or damage will be assessed by the insurer. If the car is safe to drive, you may need to take it to a location the insurer advises. If it cannot be driven, your insurer will let you know how the car will be assessed. 
    • If the claim is accepted and your car is assessed as a total loss, the insurer will confirm what will happen next. If you have market value cover the insurer may obtain valuations to assist in the settlement of the claim. These are called pre-accident valuations or PAVs and will be what the car was worth immediately before the accident. The insurer will confirm the claim settlement amount and the steps required to finalise the claim. 
    • If your car is not assessed as a total loss, the car will be repaired following the steps set out in your policy wording. 
  2. How insurers assess if your car can be repaired

    Insurers appoint a motor vehicle assessor to assess if the car can be repaired safely and economically. The insurer will generally review both the information about the cost to repair the car (estimates or quotes) and professional opinions to determine if the car will be treated as a total loss. 

    There are legal requirements outlining when a car cannot be repaired. If there is structural damage to a car, it may not be able to be repaired. 

    If you disagree with the insurer’s assessment of your car, you can obtain your own opinions and/or quotes from qualified professionals. You can request the insurer reviews its decision. 

  3. What does total loss mean?

    Generally, an insurer will settle a car claim as a total loss if:

    • The damage is too extensive to be safely repaired 
    • It is uneconomic to repair the car
    • The car has been stolen and hasn’t been recovered.

    Your policy will confirm the circumstances when your claim will be paid as a total loss. If you’re not sure, ask your insurer for more information. 

    Sometimes, the insurer may refer to the car being “written-off”. If the car is a “write-off”, it will be considered a total loss. 

  4. The difference between agreed value and market value cover

    Agreed value is the amount you and the insurer have agreed represents the value of the car. The total loss claim settlement will be based on the agreed value amount confirmed in your policy schedule. 

    The agreed value may decrease each time your policy is renewed so it’s important to check the policy schedule at renewal to make sure you agree with the lesser amount.   

    Market value is what your car is worth at the time of the accident. The total loss claim settlement amount will be based on the assessed market value of the car, using information obtained during the claims process. 

    Your policy schedule will show a sum insured. This is the maximum amount the insurer will pay for the claim. However, the market value of the car may be assessed as less than the sum insured at the time of the claim. 

  5. You may not receive reimbursement of your annual premium

    Even if the car accident happens a few months into your policy period, your insurer may still require you to pay the full annual premium. 

    If you pay by monthly instalments, this could mean the insurer will deduct the remaining premium owing from your claim settlement. 

    When you arrange insurance, you agree to pay the full premium in return for the insurance cover. Your policy will confirm whether the full premium is payable if the car is a total loss. If you are not sure, check with your insurer. 

  6. Your insurer may require your car to be deregistered before it settles the claim

    If your car is assessed as being unsafe to return to the road, your insurer may require the car to be deregistered and disposed of. This is usually if:

    • There is structural damage to the car, or 
    • Its systems have been compromised by water or fire.
  7. I’m not happy with the insurer’s assessment and/or total loss settlement amount – what do I do now?

    You can request a review of the claim decision through your insurer’s internal complaints process. If you are unhappy with the complaint response, you can ask the IFSO Scheme to investigate your complaint, for free. 

Tips to avoid problems

Read your policy

Check your insurance policy to understand the type of cover you have for a total loss claim. If you would like to change the type of cover, or insured amount, talk to your insurer. 

Check your policy schedule at each renewal

The agreed value or sum insured may decrease each year. Make sure you read your full policy schedule at renewal and check you are comfortable with the amount your car is insured for. You can request any changes to the amount by contacting your insurer. 

When you pay the premium following renewal, you are accepting the new terms of cover. 

Obtain a vehicle valuation or repair quote if needed

If you disagree with the insurer’s market valuation your car at renewal, you can obtain your own valuation/s or quote/s from a qualified professional and provide these for review.