Insurance: What Is Excess?

When you take out an insurance policy—whether for your car, home, travel, or health—you’ll often come across the term “excess.” It’s a key feature of most policies, but many people aren’t entirely sure what it means or how it affects their claims. Understanding excess can help you make better choices when buying insurance and avoid surprises when making a claim.

What Does “Excess” Mean in Insurance?

Excess is the amount of money you agree to pay towards a claim before your insurer covers the rest. In other words, if you make a claim, you’ll contribute the set excess first, and the insurance company pays the remaining cost up to your policy limit.

For example, if your car insurance excess is £250 and you make a claim for £1,000 worth of repairs, you’ll pay £250 and your insurer will cover the remaining £750.

Types of Excess

Compulsory Excess
- This is set by the insurer and is non-negotiable. It’s often based on factors like your age, driving experience, or the type of cover you have. For instance, young drivers often face higher compulsory excesses on car insurance.
Voluntary Excess
- This is an additional amount you choose to pay on top of the compulsory excess. Opting for a higher voluntary excess can lower your premium, but it means you’ll pay more if you make a claim.

Why Does Excess Exist?

Excesses are designed to prevent small or unnecessary claims, which keeps premiums affordable for everyone. They also encourage policyholders to take greater care, since they’ll be out of pocket for at least part of any claim.

How Excess Affects Your Policy

Premiums: Generally, a higher excess lowers your premium, while a lower excess raises it.
Claim Decisions: If the cost of repairs or loss is close to the excess, you might decide not to claim at all. For example, if your excess is £300 and your repair bill is £350, claiming may not be worthwhile.
Multiple Excesses: In some cases, different excesses can apply to the same policy—for example, one for fire damage and another for theft.

Tips for Choosing an Excess

Balance affordability and savings: Don’t choose a voluntary excess so high that you can’t realistically pay it in the event of a claim.
Check different scenarios: Think about the risks you’re most likely to face and how excess would apply.
Compare policies carefully: A cheaper premium with a high excess isn’t always the best deal if it leaves you unable to claim when you need to.

FAQ: Common Questions About Insurance Excess

1. Can I change my excess after taking out a policy?
Yes, most insurers allow you to adjust your voluntary excess, but changing your compulsory excess is usually not possible. Always check with your insurer before making adjustments.

2. What happens if I can’t afford the excess?
If you cannot pay the excess, the insurer may refuse the claim or deduct the excess from your settlement. Some insurers offer payment plans for excess in certain circumstances.

3. Does excess apply to all types of claims?
Not always. Some claims, like those for total loss or certain natural disasters, may have different excess rules. Always read your policy document carefully.

4. Are excesses refundable?
No, excesses are your contribution to the claim and are not refundable, even if the insurer pays the full claim.

5. Can a higher excess reduce my premium?
Yes. Choosing a higher voluntary excess can lower your insurance premium because you are taking on more of the risk yourself.

Final Thoughts

Excess is a simple but important part of insurance policies. It’s essentially your share of the risk: the more you agree to pay, the less your insurer charges upfront. By understanding how compulsory and voluntary excesses work, you can choose a policy that balances affordable premiums with manageable claim costs.