Like telematics and black box curfews, ‘insurance excess’ is another term you have to get used to as a new driver. It’s a phrase you could hear many times without truly understanding. However, to get the most from your car insurance policy, it’s important to learn the lingo.
What is excess on car insurance?
Your insurance excess is how much you’ll have to pay in the event of a claim. So, if you make a claim worth £1,000 and your total excess is set at £300, your insurance provider will only pay £700, and you’ll be responsible for paying the rest.
Agreeing to pay more excess may be one way of reducing the cost of car insurance. But, this strategy comes with risks.
We’ve put together this guide to the types of excess – so you understand what you’re signing up for.
What’s the difference between voluntary and compulsory excess?
You set your voluntary excess, while the compulsory excess is set by your insurer. With voluntary excess, you can choose the amount you’re willing to pay.
Compulsory excess explained
Compulsory excess is unavoidable in car insurance. Most insurance policies come with this type of excess, partly to reduce the number of minor claims.
It is possible to have some control over your compulsory excess – choosing an insurance-friendly first car is a good way to plan ahead. While a basic rate will always exist, your compulsory excess is calculated using a number of factors, including the car you drive and your age.
New drivers usually have to pay a premium on their compulsory excess, and young people under 25 will also pay more. Because young drivers are seen as a higher risk to insurers, the ‘young driver’ premium becomes a reality when you finally shed the L plates.
Other factors will also influence your compulsory excess – sometimes you’ll have to pay extra if you drive a high-performance car. This might not be the case for a Corsa, but it’s still worth bearing in mind!
Voluntary excess explained
Voluntary excess is an additional excess you can opt in to – and you decide how high it goes. Though it may seem unusual to opt for a higher bill, setting a higher excess may make your everyday car insurance costs cheaper. No young driver enjoys paying over the odds for insurance, so increasing your voluntary excess is one way to try and save.
You should note that your voluntary and compulsory excesses are added together. When you get a quote for car insurance, it’s worth testing out how voluntary excess affects your price. Make sure you’re able to afford the combined cost of your voluntary and compulsory excesses in case you have to claim.
When do you pay excess on car insurance?
You pay excess on car insurance when you need to make a claim. This could happen if you have an accident or if your car is damaged and needs to be repaired. However much your excess is - and whatever type you have in place, voluntary or compulsory - you will pay this up front, and your insurance provider covers the rest of the claim total, up to any cover limits.
Should I raise my voluntary excess?
Sometimes, deciding on the right car insurance excess can feel like a gamble. You might be tempted to raise your voluntary excess – after all, how likely is a claim? But, if you’re bumped, scraped, or make a motoring mishap, you’ll have to pay much more.
One important thing to consider is the value of your car. If a higher excess comes close to the full value of your vehicle, this could mean it’s almost impossible to make a claim.
If your car is worth £700 and your total excess is £600, it doesn’t take a maths whizz to see that you don’t have much room to manoeuvre.
This means you may need to keep some money saved for bumps, scrapes and minor accidents.
How can I get the best car insurance deal?
Besides increasing your excess, there are other ways you can try to lower your car insurance as a young driver. Selecting a policy with telematics technology is a popular option. You may pay a little more on your excess if you need to make a claim, but your day-to-day costs could potentially be much lower.
Correct at the time of publication. Information in this article has been gathered from various sources, therefore WiseDriving cannot be held responsible for any view or opinion expressed herein.
