Car insurance policies can be quite complex, and one of the most confusing aspects of these policies is the concept of excess. Excess is an essential element in car insurance that has significant implications for policyholders. In this article, we will examine what excess is, how it works, and its significance in car insurance.
What is excess in car insurance?
Excess is a fixed amount of money that a policyholder must pay when making an insurance claim. It is also known as a deductible. The purpose of excess is to share the cost of the claim between the insurer and the policyholder. By having excess, insurers can reduce the number of small claims they receive. This helps keep car insurance premiums affordable for everyone.
How does excess work in car insurance?
Let’s say you are involved in an accident, and the total damage to your vehicle amounts to $10,000. If you have an excess of $500, you will need to pay this amount before your insurer covers the remaining $9,500. If the repair costs less than the excess, you will have to cover the entire bill yourself.
It’s worth noting that some insurers offer policies with no excess. However, this often means that the premiums are higher. For some drivers, paying a higher premium may be more affordable than paying a significant excess in the event of an accident.
Different types of excess
There are two main types of excess: compulsory and voluntary.
Compulsory excess is set by the insurer and applies to all policies. This type of excess cannot be adjusted and is typically based on factors such as the age of the driver or the type of vehicle insured. Compulsory excess varies from one insurer to another.
Voluntary excess is set by the policyholder and is an optional extra. Policyholders can choose to increase their voluntary excess to reduce their premiums. This means that, in the event of a claim, they will have to pay more upfront. However, the higher excess usually translates to a lower insurance premium.
Significance of excess in car insurance
Excess is a crucial concept in car insurance as it affects the cost of your policy and the amount you may have to pay if you make a claim.
For example, if you have a low excess, your premiums are likely to be higher than if you had a higher excess. This is because insurers view drivers with a higher excess as less likely to make a small claim and therefore less risky to insure.
On the other hand, a high excess can lower your overall policy premium, but it also means that you will be responsible for paying more out of pocket in the event of a claim. It’s essential to strike a balance when choosing an excess that works best for you.
It’s also worth noting that some insurers offer policies with varying excess amounts depending on the type of claim. For example, the excess for windscreen damage may be different from the excess for an at-fault accident. This allows policyholders to tailor their excess to their specific circumstances and needs.
Is it worth having excess on car insurance?
Whether or not it’s worth having excess on car insurance depends on your individual circumstances and priorities.
Having a higher excess can reduce the cost of your car insurance premiums, as insurers view drivers with higher excesses as less likely to make small claims. This can be an attractive option for those looking to save money on their car insurance policy.
However, in the event of an accident, having a high excess means you will have to pay more out of pocket before your insurer covers the remaining costs. If you cannot afford to pay a high excess, this could result in financial difficulty.
On the other hand, having no excess or a low excess means you will have less upfront expenses in the event of an accident. However, this often comes at the cost of higher premiums.
Conclusion
Excess is an important aspect of car insurance that can significantly affect your policy’s cost and payout in the event of an accident. While having no excess may seem like an attractive option, it often comes with a higher premium. On the other hand, a higher excess can lower your premium but also means that you will have to pay more in the event of a claim. It’s essential to carefully consider your options and choose an excess that works best for you.
