Car insurance is a necessary expense for drivers, but it can be confusing to understand all of the details. One aspect that can be particularly confusing is the excess on car insurance. This is the amount you agree to pay towards any claims you make, and it can have a big impact on your premium and your potential payout in the event of an accident. In this article, we’ll take a closer look at how excess on car insurance works.
What is Excess on Car Insurance?
Excess on car insurance refers to the amount of money you agree to pay towards any claims you make before the insurer starts paying out. It’s also known as a deductible in some countries, such as the United States. The idea behind excess is that it helps keep premiums lower by allowing drivers to share some of the risk with the insurer.
For example, if you have an excess of £500 and you make a claim for £4,000, you will pay the first £500 and the insurer will pay the remaining £3,500. If the claim is less than your excess, you won’t receive any payout from the insurer.
There are two types of excesses: compulsory and voluntary. Compulsory excess is set by the insurer and is typically based on factors like age, driving history, and the type of car you’re insuring. Voluntary excess, on the other hand, is set by you when you take out the policy. You can choose to increase your excess in order to reduce your premium, but keep in mind that this means you’ll have to pay more towards any claims you make.
How Does Excess Affect Your Premium?
The amount of excess you agree to pay can have a big impact on your premium. Generally speaking, the higher your excess, the lower your premium will be. This is because insurers see drivers who are willing to pay a higher excess as being less likely to make claims.
However, it’s important to strike a balance between your excess and your premium. You don’t want to set your excess so high that you won’t be able to afford to pay it if you need to make a claim. On the other hand, setting your excess too low can mean that you end up with a higher premium than necessary.
When deciding on your excess, it’s also important to consider the value of your car. If you have an older or less expensive car, it may not be worth setting a high excess as the potential payout from the insurer may not be very high.
How Does Excess Affect Your Payout?
The excess you agree to pay can also affect your potential payout in the event of an accident. If your excess is higher than the cost of the damage to your car, you won’t receive any payout from the insurer. For example, if you have an excess of £1,000 and the cost of repairing your car is £800, you won’t receive any payout from the insurer.
On the other hand, if your excess is lower than the cost of the damage to your car, you’ll receive a payout for the difference between the two amounts. For example, if you have an excess of £500 and the cost of repairing your car is £1,000, you’ll receive a payout of £500 from the insurer.
It’s important to keep in mind that making a claim will still affect your future premiums, even if you’ve paid your excess. Insurers view drivers who make claims as being more likely to make claims in the future, which can result in higher premiums.
What Does Car Excess Insurance Cover?
The coverage provided by car excess insurance can vary depending on the policy you choose, but typically it covers the following:
1. Excess charges: Car excess insurance will cover the excess charges you would normally have to pay in the event of a claim, up to the limit specified in the policy.
2. Damage caused by an uninsured driver: If you’re involved in an accident with an uninsured driver and they are found to be at fault, their insurance won’t cover your damages. However, car excess insurance can help cover your excess charges and any other costs associated with the accident.
3. Damage caused by a hit-and-run driver: If you’re involved in an accident with a hit-and-run driver and they can’t be identified, you may be left to pay for the damages yourself. However, car excess insurance can help cover your excess charges and any other costs associated with the accident.
4. Theft or damage to personal belongings: Some car excess insurance policies also provide coverage for theft or damage to personal belongings that were inside the car at the time of the incident.
Conclusion
Excess on car insurance is an important aspect of your policy that can affect both your premium and your potential payout in the event of an accident. By understanding how excess works and taking the time to choose the right level of excess for your needs, you can help ensure that you’re getting the best value for your money and have the coverage you need in case of an accident.
