Car insurance is a necessary expense for all drivers, but the world of car insurance can be overwhelming and confusing. One aspect of car insurance that frequently confuses drivers is the concept of car insurance excess. Understanding car insurance excess is critical to finding the right car insurance policy for your needs and saving money on your premiums.
This article will explain what car insurance excess is, the different types of excess, and how it impacts insurance costs. Car insurance excess refers to the amount of money that drivers must pay out of pocket before their insurance company covers the rest of the cost of a claim. The excess can be a set amount or a percentage of the total claim, depending on the policy.
Many drivers may not realize that excess can significantly impact the cost of their car insurance policy. Understanding the different types of excess and how they affect insurance costs can help drivers make informed decisions when selecting a car insurance policy. By the end of this article, drivers will have a better understanding of car insurance excess and how to use it to their advantage to save money on their car insurance policy.
Key Takeaways
- Car insurance excess is the amount you’ll have to pay if you claim your car insurance, irrespective of fault.
- The excess level can be decided by the car insurer or by you (known as voluntary excess) and the excess level will be stated on your policy documents.
- A higher voluntary excess may mean cheaper annual insurance costs, and car insurers may offer windscreen, window glass and lost and stolen keys coverage without requiring excess payment.
- My Insurance Guide provides a car insurance guide that independently compares various insurance providers to help you find the right car insurance deal based on price, cover, excesses, and payment terms.
What is Car Insurance Excess?
Car insurance excess refers to the amount that a policyholder is obligated to pay when making a claim, regardless of fault. The excess level can be set by the insurer or the policyholder themselves as voluntary excess. The excess level is declared in the policy documents and can only be changed above the insurer’s minimum amount.
Most car insurance policies allow policyholders to choose an excess level of up to $1,000 or even $1,400. While paying an excess amount may seem like a disadvantage, it can also have benefits. A higher voluntary excess amount can lead to less expensive annual insurance costs.
However, policyholders need to make sure that the chosen excess level is affordable, should they need to make a claim. If another driver caused the accident and accepts liability, the insurer may refund the excess amount. However, it’s vital to note that this is not a guarantee, and the insurer must have enough information to confirm that the other party was involved and entirely at fault for the accident.
Types of Excess
Different types of excess can affect the cost of car insurance policies. There are three main types of excess: standard, voluntary, and graduated or additional excess for young drivers.
Standard excess is the amount set by the insurer and is mandatory for all policyholders.
Voluntary excess, on the other hand, is set by the policyholder and is an amount they are willing to pay in addition to the standard excess.
Lastly, graduated or additional excess is common for young drivers and is an amount that increases with the age and experience of the driver.
When choosing the right excess level, it’s important to consider both the pros and cons of each type.
Opting for a higher voluntary excess may result in lower annual policy costs, but it also means that the policyholder will have to pay a higher amount in the event of a claim.
On the other hand, choosing a lower excess level may result in higher annual policy costs but may be more manageable for the policyholder in the event of a claim.
Ultimately, it’s important to find the right balance between the excess level and the annual policy cost that best suits the policyholder’s financial situation.
Impact on Insurance Costs
The level of excess chosen can significantly influence the annual policy costs of a car insurance policy. A higher voluntary excess may mean cheaper annual insurance costs, as the insurer will expect the policyholder to absorb more of the cost of any claim. On the other hand, a lower excess will result in higher annual policy costs, as the insurer will need to cover a larger proportion of the claim.
It is important to note that the excess level chosen should be affordable in case of a claim, as the policyholder will be responsible for paying this amount upfront. While a high voluntary excess may result in lower policy costs, it also carries some risks. The policyholder may be reluctant to make a claim, as the excess amount may be too high to afford. Additionally, if the policyholder is at fault for the incident, they will still need to pay the excess amount.
It is important to weigh the pros and cons of voluntary excess carefully before deciding on the excess level for a car insurance policy.
Frequently Asked Questions
Can I choose to have no excess on my car insurance policy?
It is possible to choose a no excess option for car insurance, but this may result in a premium increase. The decision to opt for no excess should be carefully considered based on individual circumstances and budget.
Will my excess be refunded if I am not at fault in an accident?
An excess refund may be possible if the other driver is entirely at fault and accepts liability. However, fault determination is not certain, and the insurer needs sufficient evidence. The excess is payable regardless of fault and is part of the insurance contract.
Are there any circumstances where I won’t have to pay excess?
An excess waiver is sometimes offered by insurers, which eliminates the need to pay an excess. Additionally, some policies may cover certain incidents, such as windscreen damage, without requiring an excess payment. However, this varies between policies and providers.
How does my driving history affect my excess level?
Claim frequency impact and no claim discount eligibility are factors that can affect your excess level. Higher claim frequency may result in a higher excess, while a clean driving history may make you eligible for a no claim discount and potentially lower excess.
Can I change my excess level during the policy term?
Changing your car insurance excess level during the policy term is possible, but it may come with pros and cons. Increasing your excess may result in lower premiums, while decreasing it may lead to higher premiums. However, insurers may not allow changes or charge administration fees.