Like telematics and black box curfews, ‘insurance excess’ is another term you have to get used to as a new driver. It’s a word you could hear many times without truly understanding – but 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.
Agreeing to pay more for your excess is one way of reducing the cost of car insurance. But, this strategy comes with risks.
We’ve put together this guide to the different types of excess – so you understand what you’re signing up for.
What’s the difference between voluntary and compulsory excess?
In a nutshell, voluntary excess is set by you, while 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. All 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, though – 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 on 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 is a sad 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 your 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 can make your everyday car insurance costs cheaper. No young driver enjoys paying over the odds for insurance, so increasing your voluntary excess is a popular way to save.
You should note that your voluntary and compulsory excesses are added together. So, if your base compulsory excess is £100, £250 could be added based on factors like your age. If you set your voluntary excess at £300, you may need to pay out £650 to make a claim.
When you get a quote for car insurance, it’s worth testing out how voluntary excess affects your price.
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.
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 many ways to get fantastic deals on car insurance as a young driver. Selecting a policy with telematics technology is a popular option.
Remember, if you have a black box installed the safer you drive the more you save. So you may pay a little more on your excess if you need to make a claim, but your day to day costs could be much lower.
