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What is car insurance excess and what should I choose?

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January 31, 2019
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There are many variables that can impact the cost of car insurance, from the power and age of the car to details such as how much excess you agree to pay. Excess itself can be a complicated topic, but this guide will give you the clarity you need to make the best decision for your situation.

What is car insurance excess?

Car insurance excess is the amount you’ll have to pay towards a claim that you make on your insurance.

For example, if damage to your car costs £1,000 and your excess is £300, you will pay £300 and your insurer will pay £700, or if your excess is £400, your insurer would pay £600.

The total excess is usually comprised of ‘compulsory’ (also called ‘mandatory’) excess and ‘voluntary’ excess.

What’s the difference between voluntary and compulsory excess?

Compulsory excess

  • The minimum amount of excess stipulated by the insurer that you must pay towards a claim.
  • You cannot change this amount.
  • The figure is set by insurers to reflect your risk level, taking into account factors such as age, claim history, engine size and where your vehicle is kept overnight.

Voluntary excess

  • The amount on top of the compulsory excess that you choose to pay towards any claims when you take out the policy. Usually, if you agree to a higher voluntary excess amount, the price of the policy decreases.

For example, if you have a compulsory excess of £200 and a voluntary excess of £100, you’ll have to pay £300 to your insurer when you make a claim. If you choose a voluntary excess of £50, you’ll pay £150, but this decision may impact the cost of your policy.

Is the excess the same for every driver on a policy?

The voluntary excess is the same amount for all named drivers on a policy with Adrian Flux. In other words, when you add additional drivers to your policy, the voluntary excess will be the same for each driver.

Compulsory excess can vary from driver to driver. Some policies include an additional compulsory excess for drivers they consider higher risk. For example, drivers under 25 years old will have a higher compulsory excess than their parents for the same vehicle.

Do I need to have a voluntary excess?

Voluntary excess is optional, meaning it is up to the customer to decide whether to have it included in their policy.

Can I change my compulsory excess?

No. This is set by your insurer.

Can I change my voluntary excess?

Yes. Your insurer will provide you with a range and you can choose a figure within it that suits you.

Why would I choose to have a voluntary excess?

The amount of voluntary excess you have can significantly impact the cost of your car insurance premium. By choosing a higher voluntary excess, you will reduce your premium; but you will also have to pay more if you do make a claim. If you choose a lower voluntary excess, your premium may be higher, because your insurer will have to pay more in the event of a claim.

If you consider yourself to be a sensible and careful driver who isn’t likely to be involved in an accident, you might decide to have a higher excess because you think you’re less likely to have to pay it.

When getting an insurance quote, try changing the voluntary excess to see how it affects your quoted premium.

Many experienced drivers recognise that years of driving gives them a relatively low probability of making a claim, so they may make the decision to pay a higher voluntary excess and benefit from lower premiums.

It is essential to set the total excess (voluntary plus compulsory) at a level that suits your wallet but will also not exceed the value of most claims.

How to choose voluntary excess rate: should I increase my voluntary excess?

Opting for a very high voluntary excess can reduce premiums but it could prove to be a false economy. For example, if repair costs are low, you may end up paying the whole amount of a claim. This can even result in you getting absolutely no advantage from your insurance policy at all because the savings you made are wiped out by the claims.

You may even decide that it’s not worth claiming on your insurance at all (though you must alert your insurer to any accidents you do have, even if you don’t claim).

For example, let’s say your excess is £200 and you make a claim for £700. You will pay £200 and your insurer will cover the rest – £500. If, as described above, your excess is higher, say £600, your insurer would only have to pay the balance of £100. In this case, it may be better for you to pay that too so as not to lose your no claims bonus.

If you are likely to make one or more small claims, you may decide that it is better, in the long run, to have a lower total excess so that the excess covers you when you need it.

For example, if your excess is only £50 and you make a claim for £1,000, your higher car insurance premiums will pay off, as you will only pay a small proportion of the repair. Bear in mind though that a claim can affect your premium for more than just one year.

Are there limits on how high or low I can go?

When making a claim you will have to pay the compulsory excess. Anything above this amount is your choice.

Most insurers will have a maximum amount for voluntary excess which is usually between £300 and £1,000. But again, the high excess may reduce premiums, but it puts the cost of any repairs back into your pocket.

Do I always have to pay the excess?

Some minor claims can be made without having to pay the excess. Ask your insurer what is and is not applicable.

You may also be entitled to a refund if the accident is not your fault and your insurer can recover the full cost from the other party’s insurance provider. This can take some time and can often end up being complicated. For example, if the other driver can’t be identified or doesn’t have insurance, you could end up having to pay the excess no matter who was at fault.

 




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