Understanding Your Insurance Excess
What it all means
If all you know about increasing your insurance excess is that it makes your policy cheaper, this blog is for you. We explain all you need to know about your insurance excess, what it means, and why it’s a good thing to have.
What is an Insurance Excess?
Insurance excess is a pre-agreed sum of money that you’ll pay your insurance provider if you need to make a claim. Often you’ll need to pay this excess before your claim can begin. Effectively, it means you’ll help pay for any repairs, such as in the event of a car crash, leak or property damage.
What is Compulsory Excess?
Compulsory excess is an amount of money that your insurance provider sets that is non-negotiable. This amunt will vary depending on your age, the type of claim you’re making and any no claims bonus that might be in play.
A compulsory excess will be added to your voluntary excess, combining to make the total amount of excess you’ll pay in the event of a claim.
What is Voluntary Excess?
Voluntary excess is an amount of money that you’ll pay in the case of a claim. You decide what this amount will be when you set up your insurance policy. The higher you set your voluntary excess, the lower your monthly payments will be, while lowering your excess will make your quote more expensive.
An example of Insurance Excess
In this example, let’s imagine that your shower cubicle has broken. The damage was not your fault and it has rendered your shower unusable. Here’s how your insurance excess will work.
Step 1. You contact your home insurance provider to make a claim. You explain all the details, when it happened, what the damage is and how it came about.
Step 2. Your insurer will send someone out to analyse the damage and work out what work is required.
Step 3. Your insurance provider will tell you how much your shower cubicle will cost to replace. Let’s say it’s £500. They’ll then ask you to pay your insurance excess. Your voluntary excess is set at £200, and your compulsory excess is a further £100. This means you’ll pay £300 in total.
Step 4. Once your excess has been paid, your insurance provider will repair or replace your shower cubicle. Your excess means you pay £300 towards the cost, while your insurance provider pays the remaining £200 and organises all the work.
In this instance, your insurance excess gets you a new shower for almost half the cost of replacing it yourself.
The Benefits Of A Voluntary Excess
A voluntary excess will lower your monthly premium. In short, the more you volunteer, the less you’ll pay each month. This is because it puts less financial strain on your insurance provider in the event of you making a claim.
The risk you take with a high voluntary excess is that it might end up costing you more than you can afford. If your voluntary excess is €500 and you can only afford to pay €200 on any given day, then you are in trouble. It is vital to set your voluntary excess at a price that you can afford
When Do You Pay Your Excess?
Your insurance excess will need to be paid before any insurance claim can begin. Often this will be the first thing you’re asked to do after contacting your insurance provider. Once they have received the money, they’ll begin work on your claim.
Do I Still Pay The Excess If I’m In An Accident That Isn't My Fault?
You’ll need to pay your insurance excess in the case of any claim, even if the damage was not your fault. However, you may be able to get this money back if your insurance provider requests it from the liable party. This can be a lengthy legal process, so you may wish to consider adding legal protection to your insurance policy so that the cost of claiming your excess back doesn’t exceed the total value you’d gain.
It’s worth noting that any insurance claim you make can affect your future excess amounts. Insurers may charge higher compulsory rates, or ask for a larger voluntary sum, if you’re known to make claims often.
Its's important to note that some insurance providers may have a cap on the amount of voluntary excess that can be applied or may not allow it at all. It's always best to check with the specific insurer or read the policy details before setting a voluntary excess, as it may not always result in a lower monthly premium. Additionally, it's important to ensure that the amount of voluntary excess you choose is something you can afford to pay in the event of a claim.