Car Insurance Excess

What is car insurance excess?

Car insurance excess is effectively the amount of money you pay from your own pocket when you make a claim on your insurance cover.

When you look at different insurance providers, you’ll find their policies all have varying levels of excess attached to their cover.

Essentially this means that the car insurance will only pay out for damages above this amount.

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How does car insurance excess work?

This will depend very much on the terms and conditions of your policy, and before making a claim you should always check this.

In very basic terms the excess is the amount you’ll pay before the insurer steps in and takes over.

So, for example if you do £1000 worth of damage to your car, and the excess on your policy is £200, then your insurer will foot £800 of the bill. You’ll be responsible for the first £200. If the damage comes to £199 - then you’ll have to cover all of it.

After paying monthly payments to cover any mishaps that occur while driving, it might seem like you’re being stung, if you have to put your hand in your pocket anyway.

However, there’s a reason for insurance excess. And it isn’t simply to take your money.

The nature of driving means that often little bumps and scratches can occur on your vehicle. Often issues such as scuff marks and minor scratches, are relatively low cost to repair, and if they don’t get fixed won’t affect the running of the vehicle.

By implementing the excess, this means drivers aren’t going to make claims for every little bump or mark on their car, reducing the amount the insurance companies have to pay out. This in turn reduces the monthly charges they require from their policy holders.

There are two types of excess, voluntary and compulsory and it’s important to be aware of how both work.

What’s the difference between voluntary and compulsory excess?

Voluntary excess is an amount you decide to pay, to contribute towards the costs involved in the event of a claim.

As this reduces the cost of a claim for the insurance company, they will often reflect this by offering you a reduced premium. Whereas, compulsory excess is set by the insurance company, is non-negotiable and is paid in addition to any voluntary excess you have agreed to pay.

You’re more likely to have a compulsory excess applied if you have a more expensive, desirable car that will cost more to repair, but also your risk level is taken into account – so if you’re seen as high risk and more likely to make a claim, insurers will add a compulsory excess.

Combining voluntary and compulsory excess

Remember to combine any compulsory and voluntary excesses when comparing quotations and choosing which policy to buy.

If you opt for a voluntary excess of £250 for example, and the car you drive carries a compulsory £300 excess, you will be expected to cover the first £550 of the total claims cost.

Also bear in mind the cheapest premium may carry a higher excess which could mean you’d be worse off in the event of a claim.

So should I be turning to car insurance policies with low excess?

A policy with a low excess essentially means that when something goes wrong with your vehicle, less money comes out of your bank account to sort the problem.

In theory, this sounds great. Yet while low excess is something you should always keep an eye on when choosing car insurance, it isn’t the be all and end all.

Car insurance cover varies from provider to provider. While low excess might initially seem appealing, you also need to take into account the level of cover you’ll be receiving and your monthly payments in order to see if you’re getting true value for money.

For example, you might rather have a £200 excess on your car insurance, but know you’re covered for every eventuality, than have a £75 excess on a policy that might not provide roadside assistance and courtesy vehicles when your car breaks down on the side of the road.

Can I use my excess to reduce monthly car insurance payments?

Yes, generally the excess on your car insurance policy can reduce your monthly payments. If you offer to pay a higher excess you’re likely to be offered lower premiums.

This reduces the risk of the insurer having to pay high amounts of money when a claim is made, and can also show that there is an extra incentive for you to be careful on the roads.