Car insurance excess is the amount of money a policyholder needs to pay when they make a claim. It plays a
key role in car insurance policies.
There are two main types of excess.
Compulsory Excess: This is a fixed amount set by the insurance company. It is based on factors such as
the type of car, the age of the policyholder, and their driving history. A higher compulsory excess
usually applies to drivers seen as higher
risk, like young or inexperienced drivers.
Voluntary Excess: This is an optional amount the policyholder can select. A higher voluntary excess can
help reduce the overall car insurance premium.
The total excess is the sum of the compulsory excess and the voluntary amount. This total tells the
policyholder how much they need to pay for a repair bill or replacement costs when making an insurance
claim.
How Does Car Insurance Excess Work?
When you file a claim on your car insurance, the excess is the amount you need to pay first. For example, if
the repair cost is £1,000 and your total excess is £300, you will pay £300. The insurer will cover the
remaining £700. The excess applies
in several situations, including theft, car accidents, and damage caused by third parties.
Types of Car Insurance Excess
There are different types of excess, including:
Compulsory Excess: This is set by the insurer and can’t be changed. It depends on
factors like the type of car and the risk profile of the policyholder.
Voluntary Excess: This is flexible and can be chosen by the policyholder. A higher
voluntary excess might lead to a lower premium.
Additional Excess: Some insurers might add extra excess for specific risks. This can
apply to drivers who have electric car insurance or those with high-performance vehicles.
Lower Premiums: If you pick a higher voluntary excess, your premium may be lower. This can help cut down
the cost of your insurance.
Discourages Minor Claims: A higher excess might make you reconsider filing small claims. This could help
you keep your no-claims discount.
Cons:
Higher Costs in a Claim: If there is a car accident or theft, the policyholder must pay a higher excess
before the insurer provides help.
Financial Strain: A very high total excess can make it difficult to afford when filing a claim.
Limited Savings: Increasing the voluntary excess may reduce premiums, but the savings might not always
be worth the extra costs you could encounter.
What to Consider Before
Choosing a Higher Excess
Before you choose to raise your voluntary excess, think about these factors:
1. Affordability
You can pay the total excess if you make a claim. If you can’t, it might be better to choose a lower excess.
2. Type of Car
For older cars that don’t have much value, paying a higher excess is not a wise choice. This is because the
cost of repairs might be less than the total excess you would need to pay.
3. Driving Habits
Policyholders who drive frequently or in dangerous areas should consider if a higher excess matches their
risk level.
4. Insurance Policies
Check the policy documents. They will help you see how the excess works. This is important for various
claims, such as theft or damage caused by other people.
How Much Voluntary Excess Is Too Much?
There is no one-size-fits-all answer for how much voluntary excess you should choose. A helpful tip is to
select an amount that you can easily afford. This amount should also lower your premium noticeably. For example:
A voluntary excess of £250 can reduce your premium by 5-10%.
A voluntary excess of £500 might give you even more savings, but it could increase your costs if you
make a claim.
Examples of How Car
Insurance Excess Impacts Claims
Scenario 1: Small Repair Bill
Cost of Repair: £300
Total Excess: £250
Outcome: The policyholder pays £250. The insurer covers the last £50.
Scenario 2: Major Damage
Cost of Repair: £2,000
Total Excess: £500
Outcome: The policyholder has to pay £500. The insurer will pay the rest, which is £1,500.
Alternatives
to Reducing Your Premium Without Increasing Excess
If a higher voluntary excess is not good for your finances, consider these other choices:
1. Telematics Policies
These policies are known as “black box insurance.” They monitor your driving habits. If you drive safely, you
can lower your premiums. This will happen without changing your excess.
2. Vehicle Security
Installing alarms, immobilizers, and trackers can help lower your insurance cost. These devices make it less
likely for theft to happen.
3. Shop Around
Check quotes from different insurance companies to find the best deal.
Price comparison tools can help you discover policies with lower monthly payments.
These tools also help you view policies with fair excess amounts.
4. Combine Policies
Some insurance companies offer discounts when you combine different policies. This can include car insurance
and home insurance.
5. Increase Your No-Claims Bonus
Do not make minor claims just to boost your no-claims discount.
This discount can lower your premium a lot as time goes by.
FAQs About Car Insurance Excess
What Is the Difference Between Compulsory and Voluntary Excess?
Compulsory excess is decided by the insurer and cannot be changed. In contrast, voluntary excess
is chosen by the policyholder. They can change it based on their financial needs.
Does Increasing Voluntary Excess Always Lower Premiums?
The amount you save can change depending on the insurer and the policy you choose. Always look at
how much lower the premium is compared to the risks you might face.
Can I Change My Excess Mid-Policy?
You typically cannot change your excess during your policy period. However, you can change it
when you renew or purchase a new policy.
What Happens If I Can’t Afford My Excess?
If you cannot pay the excess when you make a claim, the insurer may not handle it. Choose an
excess level that fits your needs.
Does Excess Apply to All Claims?
Excess often applies to many claims. This includes claims for accidents and theft. However, some
policies may not ask for excess in specific cases. This is true when the policyholder is not at
fault.
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