What is car insurance excess and how does it work?
Car insurance excess is the portion of a claim you agree to pay before your insurer covers the rest. Think of it as your contribution toward repair or replacement costs. It’s typically made up of two parts: compulsory excess, set by your insurer, and voluntary excess, which you can adjust based on your preferences.
For example, if your claim totals £1,000 and your excess is £300, you’ll pay £300, while your insurer covers the remaining £700. This applies to most claims, whether for repairs, theft, or other damage.
Understanding car insurance excess is key to finding the right balance between affordable premiums and manageable claim costs.
In this guide, we’ll explain the different types of excess, explore when and how it applies, and share practical tips to help you make the best decisions for your policy.
What are the different types of car insurance excess?
Car insurance excess is split into two main types: compulsory excess and voluntary excess. Both play a key role in determining how much you’ll pay if you make a claim and how much you’ll save on your premiums.
Compulsory Excess
Compulsory excess is the fixed amount set by your insurer. You don’t have control over this, as it’s based on how the insurer evaluates your risk. Younger or less experienced drivers, as well as those driving high-value or high-performance cars, often have higher compulsory excess.
For example, if your compulsory excess is £250 and you make a claim for £1,000, you’ll need to pay £250 upfront, and your insurer will cover the remaining £750. Compulsory excess is non-negotiable, so it’s something to factor into your decision when choosing an insurer.
Voluntary Excess
Voluntary excess is the additional amount you choose to pay on top of your compulsory excess. It’s an optional element, but selecting a higher voluntary excess can reduce your premiums. However, it comes with greater financial responsibility during a claim.
Here’s an example: Let’s say your compulsory excess is £250, and you add a voluntary excess of £150 to lower your premiums. If you make a claim worth £1,000, you’ll need to pay a total of £400 (£250 compulsory + £150 voluntary), with your insurer covering the remaining £600.
Important considerations
- Affordability: Always choose a voluntary excess you can comfortably pay alongside your compulsory excess.
- Premium Savings: While increasing your voluntary excess reduces your premiums, the savings should justify the added risk.
- Driving Habits: If you’re a cautious or low-mileage driver, a higher voluntary excess might work in your favour.
By understanding these two types of excess, you can tailor your policy to suit your financial situation and driving habits, ensuring you’re protected without overpaying.
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Get QuotesHow does car insurance excess work in practice?
When you make a claim, your car insurance excess is the amount you’ll need to contribute towards the costs before your insurer covers the rest. This includes both the compulsory excess set by your insurer and the voluntary excess you’ve chosen to add.
This shared cost structure helps keep premiums affordable while encouraging responsible claims management.
Excess isn’t always straightforward. If the repair costs are lower than your combined excess, your insurer won’t contribute, and you’ll need to pay out of pocket. In no-fault accidents, insurers may charge your excess initially but refund it if they recover the costs from the other driver’s insurer. Similarly, for write-offs, the excess is deducted from the final settlement amount, leaving you with the balance.
Knowing how excess applies can help you make confident decisions about when to claim and how to manage your policy effectively.
Do you always have to pay the excess?
No, you don’t always have to pay your car insurance excess. While it typically applies to most claims, there are situations where it might not be required.
If the accident was caused by another driver and their insurer accepts full liability, you may not need to pay your excess at all. However, in some cases, insurers may ask for the excess upfront while they recover the costs from the other driver’s insurer. Once recovered, your excess is refunded.
There are also situations where paying the excess doesn’t make financial sense. For instance, if the repair costs are less than your combined compulsory and voluntary excess, your insurer won’t contribute to the claim. In this case, it’s usually better to pay for the repairs out of pocket to avoid making a claim unnecessarily.
Excess protection policies can also make a difference. These policies reimburse the amount you pay as excess, giving you peace of mind even if you have a higher voluntary excess.
Why should you consider voluntary excess carefully?
Voluntary excess can be a great way to reduce your car insurance premiums, but it’s important to strike the right balance. Choosing the wrong amount could leave you struggling financially during a claim or saving less on your premiums than you expected.
By opting for a higher voluntary excess, you’re agreeing to pay more out of pocket if you make a claim. While this reduces your premiums, it’s crucial to choose an amount you can realistically afford. For instance, saving £50 a year on your policy might not be worth the stress of paying an additional £200 in excess during a claim.
Key considerations
- Your Financial Situation: Choose an amount that aligns with your disposable income to avoid financial strain during a claim.
- Savings vs. Risk: Compare the premium savings to the potential cost of paying a higher excess.
- Driving Habits: If you rarely make claims or drive fewer miles, a higher voluntary excess might save you money.
Voluntary excess is a flexible tool, but it only works if it’s tailored to your financial circumstances. Choosing carefully means you can save on premiums without worrying about affordability in the event of a claim.
When and how to choose the right excess
The right car insurance excess isn’t a one-size-fits-all solution—it depends on your personal circumstances. The key is to balance affordability with premium savings and revisit your decision as your situation changes.
When should you consider adjusting your excess? Changes in your financial situation, driving habits, or car value are all good opportunities. For instance, if your car’s value has depreciated significantly, you may want to lower your excess to avoid paying more than the vehicle is worth in repairs. On the other hand, if your finances improve, increasing your voluntary excess can help you save on premiums without worrying about claim costs.
Practical tips for choosing the right excess
- Start with Affordability: Can you comfortably pay the combined compulsory and voluntary excess tomorrow if needed? If not, consider a lower amount.
- Factor in Premium Savings: Use online tools to experiment with how different voluntary excess amounts affect your premiums. A small increase in excess could result in significant savings.
- Consider Claim Frequency: If you’re a cautious driver with a low risk of claims, opting for a higher voluntary excess might make sense. Conversely, high-risk drivers should keep it manageable.
Choosing the right excess isn’t something you set and forget. Reassess your decision whenever your circumstances change, ensuring your policy stays aligned with your financial situation and risk level.
Why should you consider excess refund protection?
Paying a hefty excess after making a claim can add extra stress to an already difficult situation. That’s where excess refund protection comes in—it’s an optional add-on that ensures you’re reimbursed for the excess you pay following a successful claim.
You’ll typically find excess refund protection offered as an optional extra by most major insurers. Some policies include it as standard, so it’s worth checking your policy documents before purchasing it separately.
Alternatively, there are standalone providers specialising in excess protection, which may offer more competitive prices than your insurer.
How does it work?
If you’ve purchased excess refund protection and need to make a claim, you’ll pay your excess as
usual. Once your claim is settled, the excess protection provider reimburses the full amount, effectively removing the financial burden. For example, if your combined excess totals £400, you’ll get that £400 back—whether the claim was for an accident, theft, or another covered event.
Is it worth it?
Excess refund protection can be particularly valuable if you’ve chosen a higher voluntary excess to save on premiums. It provides peace of mind by eliminating out-of-pocket expenses after a claim, making it a smart option for drivers who want financial security without compromising on premium costs.
Final thoughts
Car insurance excess might seem like a small part of your policy, but it has a significant impact on both your premiums and claim costs. Whether it’s the compulsory excess set by your insurer or the voluntary excess you choose, finding the right balance is key to ensuring your policy works for you.
When deciding on your voluntary excess, consider your financial situation and driving habits carefully. A higher voluntary excess can save you money on premiums, but only if you’re confident you can cover the cost in the event of a claim. And don’t forget about options like excess refund protection, which can provide additional peace of mind if you’ve chosen a higher excess.
Ultimately, understanding how car insurance excess works and tailoring it to your needs puts you in control of your policy. Regularly reviewing your excess settings as your circumstances change ensures you’re always getting the best value and protection.
Frequently Asked Questions (FAQs)
Yes, if the other driver is proven at fault and their insurer accepts liability, you may not need to pay the excess. However, some insurers might ask for it upfront and refund it later.
In most cases, yes, excess applies. However, it may not apply to certain claims like windscreen repairs or if your policy includes specific waivers. Always check your policy details.
If your car is declared a total loss, your insurer will deduct your excess from the payout amount. For example, if the payout is £5,000 and your excess is £500, you’ll receive £4,500.
Yes, with excess protection, the amount you paid will be reimbursed after a successful claim. This can be particularly useful if you have a higher voluntary excess.
If the cost of repairs is less than your total excess, your insurer won’t contribute to the claim. It’s often better to pay for minor repairs yourself in these cases to avoid increasing your premiums.
Insurers usually have a cap on voluntary excess, which varies by provider. You can’t set it infinitely high, so check with your insurer for limits.
No, compulsory excess is determined by your insurer and is based on factors like your age, driving experience, and car type. It’s non-negotiable.
Choose an amount you’re confident you can pay upfront if needed. Use online calculators to experiment with premium savings and strike a balance between affordability and risk.