How does car insurance excess work?

• What Is Car Insurance Excess?

Car insurance excess is the amount of money that you agree to pay out of pocket if you make a claim on your car insurance policy. The purpose of car insurance excess is to reduce the number of small claims that insurance companies receive. By requiring policyholders to pay a portion of the cost of a claim, insurance companies are able to keep their premiums lower.

• How Does Car Insurance Excess Work?

Let’s say you get into a car accident that results in $10,000 worth of damage to your car and you have an excess of $500. If you make a claim with your insurance company, the insurance company will pay $9,500 towards the cost of the repairs, and you will be responsible for paying the remaining $500.

In some cases, you may be able to choose the amount of excess that you want to pay. Typically, the higher the excess, the lower your insurance premium will be. However, it is important to choose an excess that you can afford to pay in the event of an accident.

It is also worth noting that some types of car insurance policies, such as comprehensive policies, may have different excess amounts for different types of claims. For example, if you make a claim for theft, your excess may be higher than if you make a claim for damage caused by an accident.

• Why Is Car Insurance Excess Important?

Car insurance excess is important for a number of reasons. Firstly, it helps to keep insurance premiums low by reducing the number of small claims that insurance companies receive. This is because policyholders are less likely to make a claim for a small amount if they know that they will have to pay a portion of the cost themselves.

Secondly, car insurance excess encourages policyholders to drive more safely. If you know that you will be responsible for paying a portion of the cost of a claim if you are at fault for an accident, you are more likely to take steps to avoid accidents in the first place.

Finally, car insurance excess ensures that insurance companies do not have to pay out on every claim, regardless of the amount. This helps to keep insurance premiums low for everyone by reducing the overall cost of claims that insurance companies have to pay.

• Conclusion

Car insurance excess is an important concept to understand when purchasing car insurance. By agreeing to pay a portion of the cost of a claim yourself, you can help to keep your insurance premiums low while also encouraging safe driving practices. When choosing your excess amount, it is important to choose a level that you can afford to pay in the event of an accident.