Understanding Car Insurance Excess: What You Need to Know

Raising your car insurance excess seems like a good idea when building your car insurance policy, but when it comes to claiming, a higher excess can be costly. Weighing up your excess options is essential for getting the most cost-effective policy that also protects your finances.

This article explores all things excess and how you can protect your excess payment in case you need to make a costly car insurance claim

Explaining Car Insurance Excess

In simple terms, car insurance excess is the amount you pay towards claims that are over your set excess amount. However, if the repair costs are lower than your total excess, you will have to cover them without the help of your insurance provider. Your total excess amount is usually made up of your compulsory and voluntary excess, which can be presented in different ways.

What are compulsory excess and voluntary excess?

The compulsory excess is the amount that your car insurer sets as the minimum required excess for your policy. This amount usually depends on a number of factors, such as age, driving experience, vehicle type or primary vehicle usage (e.g. commercial or domestic). This isn’t always presented separately, but it’s typically the minimum excess amount you can choose.

There are a few scenarios where the compulsory excess can vary depending on your type of claim. For instance, if you’ve written off a car (it’s been damaged by fire or stolen), the claim relates to the windscreen, or you go to a non-approved repairer, the excess might be higher than usual.

The voluntary excess is the amount that you volunteer to pay towards each claim in addition to the compulsory excess. It’s not always presented separately from your compulsory excess. Offering to contribute more towards a claim reduces your insurance premium in most cases.

How car insurance excess works

If the repairs exceed your set total excess (voluntary and compulsory combined), then you will need to pay your excess upfront in order to initiate a car insurance claim and they will cover the remaining cost. If the repair amount is less than your excess, you don’t need to initiate a claim.

There are a few scenarios where excess can get a bit more complicated, such as when you’re claiming after a total loss, on fire damage, windscreen repairs or on repairs made at a non-approved garage. The examples below explore how different excess amounts can impact the amount you can claim from car insurance.

1. Your car’s windscreen needs replacing after an accident, and your regular excess of £250 has increased to £350. It costs £475 for repairs, so you can only claim £125 from your car insurance company.
2. You write off your car, and your car insurance excess has gone up to £500 from the typical £300. The market value settlement is £7,565, so you would receive a payout of £7,065, unless you have excess cover in place.
3. Your car needs repairs of £385, but your car insurance excess is £350. You could choose to claim £35 back from your insurer and pay the excess, or you could keep your no-claims discount and cover the full cost of repairs yourself. If you have excess cover, the decision to claim is easy.
4. Your car needs extensive repairs costing £795, but you set a high voluntary excess of £650, and although the claim is covered, you only get £145 from your car insurance when you’re paying £650 towards the claim. Car insurance excess cover makes it much more worthwhile to make a claim.

These examples outline how higher excesses can impact your finances. When you need to claim, your car insurer may only end up paying a fraction of your repair costs. It’s important to consider your voluntary excess or get excess protection to reduce your out-of-pocket expenses.

When do you pay car insurance excess?

You must pay your insurance excess when you initiate a claim. If it’s later proven that the incident wasn’t your fault, you can be reimbursed this amount. The only times you may not be required to pay excess is if the excess is waived or if it will be deducted from a total loss payout. If you have third-party excess cover, the amount will be reimbursed after your claim is approved.

How Much Excess Should You Pay?

There’s no one-size-fits-all for choosing the right excess, but it can be tempting to choose a higher amount to bring your premiums down. However, this can leave you covering a significant amount towards your car insurance claim.

Your total excess should be an affordable amount that shouldn’t cause you to struggle financially if you need to make a claim, but your insurance premium needs to be affordable, too. A good rule of thumb is to select a voluntary excess that is no more than 10% of your monthly take-home income. If you take home around £2,000 per month, a maximum guideline for your voluntary excess would be approximately £200.

Remember that this is in addition to the excess amount set by your insurer. If you have a high compulsory excess, you may want to reduce your voluntary contribution, but be aware of the impact on your monthly payments.

Optimising your Excess: Should you Pay More or Less?

It’s usually best to opt for the lowest excess possible that results in an affordable premium for you. Otherwise, you car insurance may not come in clutch when you need it. However, if you’re a young or inexperienced driver or you have a specialised policy, increasing your excess may be the only way to stick to your budget.

Experiment with different excesses and see how it affects the premium. Start low and raise the excess by equal increments (e.g., £50), noting the savings; when the savings start to diminish, that’s when it’s best not to increase the excess any higher.

Is Car Insurance Excess Cover Worth It?

Car insurance excess cover is available for those who want to minimise their out-of-pocket expenses when making a car insurance claim. If you have a high excess to bring your premium down, it can be helpful for cash flow if you need to make a claim. However, even drivers with low excess can benefit because the lower claims threshold makes you more likely to need excess cover.

With ALA, policies start at £23.86 for one year, and you can claim as many times as you need until you reach your policy limit. It’s usually much more affordable to buy an excess cover policy covering all your needs than to select a zero excess insurance policy on your car insurance.

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Frequently Asked Questions:

How does excess affect the claim process?

When claiming on car insurance, you will usually have to pay the excess first to initiate the claim. This can often be done at your repair garage after the repairs are completed.

What happens if the accident isn’t my fault?

If the accident isn’t your fault, you’ll be claiming repairs on someone else’s car insurance, not your own so you don’t have to pay excess. You may be required to pay the excess anyway but this will be reimbursed after proof of fault has been acquired.

What if I can’t afford my voluntary excess?

If you selected a voluntary excess that was too high or you’re in a difficult place with your finances, it’s best to buy excess protection from just £23.86 per year, before you need to make a car insurance claim. Otherwise you may not be able to claim on your car insurance at all, leaving you with a significant repair bill.