Understand your excess
An excess is the amount which the policyholder will have to pay towards the total cost of a claim. Excesses come in two varieties: compulsory (applied by insurers) and voluntary (accepted by policyholders usually in return for a discount from the premium).
What is car insurance excess, how does it work, and when will I pay it?
All car insurance policies are subject to an excess. An excess will be applicable to any claim that involves the insured vehicle. Examples include repairs following an accident or the total loss of the vehicle because of accident, fire, or theft.
After repairs to an insured vehicle, the policyholder must pay the excess to the garage before they will release it. The insurance company will then meet the remaining cost of the claim.
For example:
- Your policy has a £250 excess
- Your vehicle sustains £2,00 worth of damage
- You pay the repairer £250, and you can claim back the remaining £1,750 from your insurance
What is voluntary excess?
This is the element of the excess that you have control over when arranging cover. Your voluntary excess depends on your personal preference, and will naturally vary from driver to driver. Those who volunteer to have a higher excess may do so because they think it will result in a lower insurance premium. However, this is not always the case.
In the event of a claim, the voluntary excess will be combined with the compulsory excess. As having a higher voluntary excess increases the amount for which you are not insured, it’s important to make sure that you could cover this combined cost if the need arises.
What is compulsory excess?
When selecting a voluntary excess, it is important to consider any compulsory excess that already applies to the policy. The compulsory excess will be combined with the voluntary amount, creating an overall policy excess. Your compulsory excess is automatically set by your insurer - you won’t have control over it. Insurance companies tend to set a minimum compulsory excess for all kinds of insurance policies.
The compulsory excess applied to a policy may increase. This may be because of the policyholder’s previous claims experience or the value of their vehicle. High-value vehicles often attract much higher excesses - even minor repairs can be expensive.
How does excess affect young and inexperienced drivers?
Many motor insurance policies include young and new driver excesses. In insurance terms, anyone under 25 years of age is classified as a young driver. Generally, insurers have two categories of young drivers: 17 to 20 years of age and 21 to 24 years of age.
Each of these age groups may be subject to a young driver excess. This is in addition to any other excess that applies to the policy. The 17 to 20 group might find that they have a higher excess than the 21 to 24 group.
A young driver excess, or a driver-specific excess, applies if a young driver is driving the car and they're deemed to be in charge of the vehicle. For example, damage occurs to the vehicle when it is parked, and a young driver was the last driver.
Young driver excesses will be detailed in policy documents. They will also be brought to the attention of a potential policyholder at the quotation stage.
What is theft excess?
Excesses are not just applicable to Comprehensive policies. Third-Party, Fire and Theft policies will often have compulsory excesses applicable to any fire or theft claims. Higher theft excesses may be imposed by insurers if circumstances present a higher-than-average theft risk.
What is windscreen excess?
Claims for damage to windscreens are dealt with under the windscreen section of Comprehensive policies. These sections are subject to specific windscreen excesses that are usually lower than the policy excesses. The young and new driver and compulsory excesses do not apply to windscreen claims, so only the windscreen excess is applied to the claim.
Additionally, a number of insurance companies will waive the windscreen excess if the windscreen requires repair rather than replacement. Repair is usually applicable to small chips that can be filled with an epoxy resin, leaving a virtually invisible repair.
Insurers often have different windscreen excesses - a lower excess may apply if a repair or replacement is carried out by their recommended windscreen repairer.
What is excess protection?
Having paid the policy excess following repair of their vehicle, policyholders may have the opportunity to recoup the amount. If repairs are needed after a non-fault accident, the excess can be claimed back from the insurers of those responsible. Some insurers/brokers will aid the recovery of the excess by the provision of Uninsured Loss Recovery insurance.
If the policyholder was at fault, there will be nobody to recover the excess from. That is unless the policyholder has purchased Excess Protection insurance.
Excess Protection insurance reimburses the policyholder for any excess (up to the limit purchased) they have paid. This is the case even if the loss resulted from a fault accident. This cover is particularly useful in cases where cumulative excesses result in a substantial overall figure.
When purchasing car insurance, your insurer should provide you with details of all excesses that apply to the policy. It is very important that you understand exactly how and when the excesses are to be applied to any claim you may make.
In some cases, “cheaper” insurance premiums may be only the result of a higher excess. This is relevant when using price comparison sites. They may assume you will accept a higher voluntary excess to get a cheaper quote.
What is driver-specific excess?
Finally, there is the matter of driver specific excess. This is an additional excess you may need to pay if an accident occurs when a specific person is driving your car. This could be another named driver on your policy.
If this person is perceived to be higher risk, insurers may apply this specific driver excess. This will depend on your insurer.