Find out why insurers charge an excess on policies and how choosing the right excess can cut the cost of your premium
When applying for car insurance or comparing quotes, you’ll notice an ‘excess’ cost alongside the premium price (the monthly or annual cost of your insurance). Read on to learn more about the different types of excess and how they can affect the overall cost of your cover.
What is car insurance excess?
A car insurance excess is the amount you are required to pay when making a claim on your insurance policy.
For example if you make a successful claim for £500 and your excess is £100, your insurer will pay you £400 to cover the cost of repair to your car — essentially you will pay for £100 of the claim (no matter how much the claim is for).
If you were involved in an accident and the insurer finds that it wasn’t your fault, you will usually be able to claim the excess back — although you will usually be expected to pay the excess while the accident is being investigated.
Your insurer will usually not pay out for a claim that costs less than your excess. They will usually recommend that you pay for repairs yourself as it wouldn’t be economical to pay for an excess charge in this case. Insurers use excess charges to prevent people making claims for lots of small issues, which would eventually drive up the cost of car insurance for everybody.
A good price comparison website will clearly show the total excess you will have to make in the event of a claim, broken down by the compulsory and voluntary amount. You should also be able to easily adjust your voluntary excess level to see how this affects the cost of your premium.
What is compulsory excess in car insurance?
The excess on a car insurance policy is usually split into two parts, known as compulsory and voluntary excess. As the names suggest, compulsory excess is a mandatory amount set by your insurer, and voluntary excess is an amount you can opt to pay.
What is car insurance voluntary excess?
So why would you choose to pay a voluntary excess? It could help you to save money as most insurers will offer you a cheaper premium if you opt to pay voluntary excess. Choosing to pay a higher voluntary excess can keep the costs of your premium down, but remember that you will have to pay this amount if you need to make a claim.
You should choose a realistic amount that you can afford to pay in the case of a claim, and bear in mind that most insurers will refuse to quote if you choose a voluntary excess that is close to the value of your car.
While voluntary excess is an amount you choose yourself, it’s no longer negotiable when you make a claim — you cannot choose to take out a voluntary excess when purchasing your insurance then opt not to pay it when the time comes to claim.
How much does car insurance excess cost?
The cost of car insurance excess varies with different policies and depending on whether you choose to have a voluntary excess as well as a compulsory one.
Most insurers will charge a higher compulsory excess for young and new drivers as they are seen to be more likely to claim than older, more experienced drivers.
Many policies have different levels of excess for different types of claim, so check your policy carefully. For example, windscreen claims are fairly common and low cost, so many insurers charge a lower excess for windscreen repairs.
Remember you won’t have to pay any excess at all if you don’t need to make a claim during the yearly term of your policy.
Car insurance excess protection
Some providers offer a different type of policy called car insurance excess protection. These policies allow you to claim back your excess if you make a claim – but be aware that it is another premium that you will have to pay, and you may end up paying for a product you don’t need if you don’t make a claim during the term of the policy.
Excess protection is more commonly available when you hire a car, as these the excesses charged by hire companies can typically be very costly and avoided with a one-off fee.