# DI-M-A-04: I don't have any emergency savings. Is choosing a bigger car insurance excess to save money a bad idea? Collected 11 October 2026 [Car insurance study](https://nzbrands.ai/research/insurance/car-insurance) ## ChatGPT Answer ID: ea26c6bc-62d0-4ed6-9649-55abae0089a2 No — but if you have no emergency savings, choosing a bigger car insurance excess is probably not the best move right now. I’d generally prioritise being able to afford an unexpected bill over saving a little on your regular premiums. In New Zealand, your car insurance excess is the amount you usually have to contribute towards a claim. Choosing a higher excess can lower your premium, but it also means you need more money available if something goes wrong. The key question isn't just whether a higher excess saves you money. It's whether you could actually afford to pay it at short notice. ## Why a higher excess could be risky You could face a bill you can't pay If your excess is NZ$1,000 and you have no savings, an accident could leave you struggling to cover the excess, even if your insurer covers the rest of the repair. The savings might be relatively small If increasing your excess saves you NZ$100 a year, you'd need ten claim-free years to save NZ$1,000 in premiums. You might save more or less depending on your policy, and you could make a claim before then. Insurance is there to protect your finances Paying a little more each month for a lower excess can be worthwhile when you don't have a financial buffer. It reduces the amount you need to find in an already stressful situation. ## What I'd do in your situation 1. Keep the excess at the lowest affordable level. If you can manage the premium, avoid increasing the excess until you have some savings set aside. This is also the advice from [Consumer NZ](https://www.consumer.org.nz/services/car-insurance/guide). 2. Shop around before accepting a higher excess. Get quotes from at least three insurers, comparing both premiums and policy coverage. You might find a cheaper policy without taking on more risk. [Car insurance buying guide](https://www.consumer.org.nz/services/car-insurance/guide)[Car insurance](https://www.consumerprotection.govt.nz/help-product-service/cars/paying-registering-insuring-car/car-insurance) 3. Start a small emergency fund. Even NZ$20 a week adds up to NZ$1,040 over a year. Once you've saved enough to cover your excess, you can reconsider increasing it. 4. If the premium is genuinely unaffordable, compare your cover options. Depending on your car's value and your financial circumstances, third-party cover might be worth considering. Just understand that it generally won't cover damage to your own car. [Car insurance buying guide](https://www.consumer.org.nz/services/car-insurance/guide) ## Let's work out whether the savings are worth the risk If you tell me two numbers, I can help you compare the trade-off using your actual figures. You don't need to have your finances perfectly sorted to make a good insurance decision. The goal is to keep your cover affordable without leaving yourself exposed to a bill you couldn't manage. ## Gemini Answer ID: 341f7002-e2e4-4b45-93c7-657fa00fa293 Choosing a higher car insurance excess (the amount you pay out-of-pocket before insurance kicks in) when you have **no emergency savings** is generally considered a **risky strategy**, though it can lower your regular premium costs in the short term. Here is a breakdown of why this approach is dangerous in your situation, along with alternative ways to manage your car insurance costs safely. --- ### Why a Higher Excess is Risky Without Savings * **The Cash Flow Trap:** An insurance excess is not a fee you pay in advance; it is an immediate bill you must settle **at the exact moment you have an accident or your car is damaged**. * **The "Can't Afford to Claim" Dilemma:** If you choose a \$1,000 excess to save a few dollars a month on your premium, but you have $0 in savings, you won't be able to pay the excess if you have an accident. This means your insurer may refuse to release your car from the repair shop, or you won't be able to fix it at all, leaving you without transport to work. * **Debt Accumulation:** If an accident happens and you are forced to pay a high excess on the spot, many people resort to high-interest credit cards, overdrafts, or payday loans, which quickly erase any savings you made on the cheaper insurance premium. --- ### How to Balance Lower Premiums and No Savings If you are looking to lower your car insurance costs because money is tight, you can explore safer alternatives than simply jacking up your excess: 1. **Opt for a Modest Excess Increase Only If You Can Cushion It:** If you must raise your excess (e.g., moving from a \$400 excess to a \$600 excess) to bring down monthly premiums, try to build a micro-emergency fund first. Even setting aside \$20 or \$50 a week until you hit your excess amount creates a safety net. 2. **Review Your Policy Inclusions:** Check if you are paying for optional add-ons you don't strictly need right now, such as: * **Rental car cover** (if you have alternative transport options like public transport or family). * **Protected no-claims bonus** (if your driving history is clean and you want to lower the base rate). 3. **Pay Annually vs. Monthly (If Possible):** Many insurers tack on interest or administration fees if you pay monthly. While paying a lump sum annually can be tough when cash is low, it often saves 10% to 15% overall compared to monthly instalments. 4. **Shop Around and Compare:** Insurance premiums vary wildly between providers in New Zealand for the exact same vehicle and driver profile. Use online comparison tools or get quotes from at least three different insurers to find a lower baseline price without compromising your excess. --- ### Recommended Action Plan 1. **Keep your excess at an affordable baseline** (e.g., \$400 to \$500) that you could realistically scrape together in an emergency through a trusted friend, family member, or selling an unused item, rather than choosing a maximum excess like \$1,000+. 2. **Open a dedicated "Car & Emergency" sub-account** with your bank and set up an automatic transfer of even \$10 or \$20 per pay cycle. 3. **Get 3 new insurance quotes** this week to see if you can lower your overall premium while keeping your excess manageable. What is the current excess on your policy, and how much would your insurer charge you if you lowered or raised it? ## AI Overviews Answer ID: 0b4a3113-90ef-4d6f-86e0-7ad5dd4141b2 Yes, **choosing a higher car insurance excess when you have zero emergency savings is generally a bad idea**. While increasing your excess from a standard $400 or $500 up to $1,000 or $1,500 will lower your immediate premium payments, it leaves you exposed to a significant **"liquidity trap."** If you get into an accident tomorrow, you must pay that higher excess amount out of pocket before the insurer will repair or replace your car. Without cash savings, this can instantly force you into high-interest debt or leave you without a functioning vehicle. * * * The Risk Matrix: Premium Savings vs. Upfront Outlay When you increase your excess, you are essentially gambling that you won't have an accident before you can save up the difference. Strategy| Monthly Premium Cost| Risk If You Have an Accident| Impact on Zero Savings ---|---|---|--- **Standard Excess** _(e.g., $400)_| Higher| **Low upfront cost** to start repairs.| Manageable or easier to borrow from family short-term. **High Excess** _(e.g., $1,000+)_| Lower| **High upfront cash required** immediately.| Forces reliance on high-interest credit cards or predatory loans. The "Hidden Costs" of a High Excess Without Savings * **The Repair Standoff:** If your car is damaged but drivable, you might be tempted to ignore the damage because you can't afford the $1,000 excess. This can lead to unroadworthy vehicles or structural degradation. * **Debt Trap:** Paying a $1,000 excess on a credit card or a high-interest cash loan can quickly wipe out any minor monthly savings you achieved on your premium. * **Multi-Excess Risk:** In New Zealand, if an accident involves an underage or inexperienced driver, or if there are multiple separate incidents, insurers may apply **cumulative excesses** (e.g., standard excess + young driver excess), driving your out-of-pocket costs even higher. * * * A Better Strategic Framework If your goal is to safely lower your insurance costs while building an emergency cushion from scratch, prioritize these safer alternatives instead: Phase 1: Alternative Cost-Cutting Measures Instead of moving the excess dial, look for alternative premium discounts: * **Shop Around:** Premium differences between New Zealand insurers can vary wildly—sometimes by up to 60% for the exact same driver profile. Use tools like [Quashed](https://quashed.co.nz) to compare quotes across multiple providers. * **Adjust Your Policy Type:** If you drive an older, low-value vehicle, consider dropping from Comprehensive insurance to **Third Party, Fire and Theft**. This ensures you are still legally covered for the massive liabilities of damaging someone else's luxury car while lowering your premium drastically. * **Remove Unnecessary Add-ons:** Drop optional extras like windscreen excess buy-back or rental car covers if you don't strictly need them. Phase 2: The "Staged Excess" Transition Once you decide to start building your emergency fund, you can safely use your insurance structure to accelerate it: 1. **Keep your excess low** (e.g., $400) for now. 2. Automate a small weekly transfer into a high-yield savings account until you hit **$1,000**. 3. **Only then** , call your insurer to raise your excess to $1,000. 4. Take the premium savings from that change and loop them back into your savings account to continue building your wider emergency fund. * * * To help me tailor this advice, could you share a bit more context? * What is the approximate **market value of your car**? * Are you currently on a **Comprehensive** or a **Third Party** policy? * Is your budget tight enough that **immediate monthly cash flow** is your absolute highest priority right now? ## Google AI Mode Answer ID: 06291cf3-7757-423e-8bdb-606d18c76454 Choosing a higher car insurance excess when you have zero emergency savings is generally a **risky gamble** , though it does lower your regular premium. * **The upside** , your day-to-day or month-to-month budgeting gets a little cheaper because your insurance premium drops. * **The downside** , if you have an accident tomorrow, you won't just be stressed about the crash—you will instantly owe a large chunk of cash (your excess) before your insurer pays out a single cent to fix your car or the other person's car. A breakdown of why this is dangerous without a safety net, along with how to approach it safely: 1. **The Cash Flow Trap** : Insurance doesn't let you "pay off" your excess over time or deduct it from the repair payout. If your excess is $1,000 and the repair shop needs it upfront or upon vehicle release, you must pay that $1,000 immediately. If you have $0 in savings, you might have to rely on high-interest credit cards, debt, or borrowing from friends/family just to get your car back. 2. **The "Can't Afford to Claim" Dilemma** : If you pick a $1,500 excess to save $10 a month, but a minor scrape costs $1,200 to fix, you can't even make a claim because the damage is less than your excess. You are paying for insurance that won't kick in for smaller, common accidents. 3. **The Better Alternative** : Instead of playing with a high excess you can't afford, look at adjusting other parts of your policy first. You can ask your insurer about lowering the agreed/market value slightly (if realistic), removing optional add-ons you don't actually need (like rental car cover if you work from home), or shopping around on [Consumer NZ](https://www.consumer.org.nz/) to see if another provider offers cheaper base rates without hiking the excess. If you'd like, share: * Roughly **how much the premium difference** is between a low and high excess * Whether your car is **essential for your work or income** I can help you figure out a safer balance for your budget.