Car insurance can be confusing at the best of times in terms of the various types on offer and policy coverage.
Another area that causes confusion is car insurance excess. Many drivers ask the questions what is car insurance excess and why is there car insurance excess? This guide will explain and hopefully simplify answers to the questions: What is car insurance excess, what is voluntary and compulsory excess, why is it used, do you have to pay it, getting cheaper car insurance by increasing your excess and can you claim the car excess insurance back in the event of a claim.
What is car insurance excess
Whilst applying for car insurance, part of the application process will involve car insurance excess. This excess is what you agree to and must pay in the event of a claim. For example, if upon initial sign up of your car insurance you agree to an insurance excess of £150 and put in a claim off of your insurance for £500, the insurance company will pay £350 and exclude the excess.
Why is there car insurance excess
Car insurance excess is procedure used by insurance providers to eliminate small claims. For example when you initially signed up with your insurance policy, you agreed an insurance excess of £150. You have an accident that causes minor damage that will cost £100 to fix. As your insurance provider would not pay the first £150 (your excess) it would not be viable to make a claim. As many small claims are made, car insurance providers use insurance excess as a means to eliminate this to gain higher profits.
Is car insurance excess compulsory or voluntary
It’s typically both. Think of it as two different types of excess.
Compulsory car insurance excess
Compulsory car insurance excess is what you must pay yourself in the event of a claim. The compulsory excess is a mandatory minimum amount you must agree upon whilst making your car insurance application. Compulsory excess is typically higher for young drivers. For example, compulsory excess for a young driver could be £300 and for an older more experienced driver £100.
Voluntary car insurance excess
Voluntary car insurance excess is a separate excess on top of the compulsory excess. Within the limitations set out on the application for car insurance, you decide the minimum or maximum voluntary you wish to pay.
Cheap car insurance high excess
The higher voluntary excess you agree to pay, the cheaper your car insurance policy will be. Be cautious however as in the event of a claim, this can become expensive. As an example of a young driver, your compulsory excess is £300 and you agree the maximum voluntary excess offered at £200. The combined total excess is now £500. If you made a claim for £1000, you will only receive £500 from your insurance company as the total excess is deducted. Plus if you have managed to acquire a no claims bonus, you may lose this by claiming and as a result will increase your future car insurance prices. With the high excess and the loss of no claims, it may not ultimately be economically viable to put in a claim.
Claiming back car insurance excess
If you have claimed off of your car insurance policy, you cannot claim back the insurance excess you originally agreed to pay. You can however take out excess insurance protection that effectively protects your compulsory and voluntary excess you originally agreed to. Excess insurance or protection as it’s also called is a separate insurance policy or an ‘extra’ that is taken alongside your main car insurance policy.
Typically the higher the excess you agree to pay on your main insurance policy, the higher the premium for the excess insurance protection. Those that are likely to benefit from excess insurance protection are often young drivers who are typically subject to a high compulsory excess and will often need to opt for the highest voluntary excess to keep their insurance premium as affordable as possible.
Do all types of car insurance have an excess
All types of car insurance are primarily based on:
To agree and pay an excess is subject to a claim made to cover yourself or your property. Third party car insurance covers the third party only (the persons, persons or persons property you damaged) and provides no coverage for you or your property. Therefore, third party only car insurance will not often have an excess applied.
Other types of car insurance explained
- How does car insurance work
- Third party car insurance
- Third party fire and theft
- Comprehensive car insurance
- Black box car insurance
- Short term temporary car insurance
- Drive any car insurance
- What is GAP insurance and do I need it?
- Green Card insurance
- No MOT, invalid insurance?