When you apply for car insurance, you’ll be given the option to adjust your ‘voluntary excess’ towards the end of the process – and changes can make a big difference to the amount you’ll pay for your cover.
It might be tempting to put your excess up to the maximum – especially since it’ll bring your overall premium price right down.
Here, we’ll look at car insurance excess payments in a little more detail – so you can work out what the right level is for you.
How do excesses work?
When you’re filling out the information we need to provide a range of car insurance quotes, you’ll see two figures mentioned – a ‘compulsory excess’ and a ‘voluntary excess’.
The idea of an excess is to prevent drivers from making small claims every time they pick up a slight knock, scuff, or chip on their vehicle. Insurance companies do this by making customers pay for a portion of any work that’s required for their own vehicle.
What are the different kinds of excess?
We’ve already mentioned that you’ll come across both a compulsory and a voluntary excess when you’re searching for a good deal on your insurance – so what’s the difference?
How does a compulsory excess work?
A compulsory excess is decided on by the insurer offering the cover. This is the minimum amount you’ll have to pay to repair any damage to your vehicle.
So, if you were involved in an accident that caused £1,000 worth of damage to your car, a compulsory excess of £200 means you’d foot the first £200 of the bill – and your insurer would pay the remaining £800.
Although you’re paying for a portion of the work to be done, you’ll often find you pay this amount to the insurer, rather than the garage that’s handling your repair. Then, your insurer handles the full repair payment.
How does a voluntary excess work?
A voluntary excess is adjustable, based on how much you feel you’d be able to pay in the event of an accident.
Generally, a voluntary excess will start around £100 – meaning you’ll have to pay whatever compulsory excess your insurer requires, plus £100. Obviously, you’ll be able to bump this amount up – usually to around £750.
As your voluntary excess increases, your overall premium price comes down – since it reduces the likelihood that your insurer will have to pay for any repairs.
When will you have to pay an excess?
Any excess payment you make will only ever be to cover repairs to your own vehicle if you’ve caused an accident.
For example, if you run into the back of another car, your insurance company will handle the repairs to both vehicles – but you’ll be expected to pay the excess for damage that’s done to your car.
On the other hand, if another car drives into you – you won’t have any excess to pay, as the other person’s insurance company will pay for the repair to your car. Even if your insurer asks you to pay an excess initially, you’ll generally get this refunded when they get it back from the other person’s cover provider.
How does hire car excess insurance work?
Another instance where you’ll see an excess discussed is if you ever hire a car for short term use.
With many rental car providers, the excess (sometimes called a ‘deductible’) that you’d be expected to pay in the event of an accident is quite large – so rental companies often allow you to pay a little more for your cover to bring this excess payment right down – or get rid of it completely.
For instance, if you hire a car, you’ll get the normal insurance package included – known as a ‘collision damage waiver’ or CDW. If you were unlucky enough to have your hire car stolen or damaged, you’d pay an excess amount that’s often hundreds (and sometimes even thousands) of pounds towards the damage.
With a car hire excess optional extra, you’ll be protected against this large payment should something go wrong when you’re in possession of the hire vehicle. The cost of this additional excess protection ranges from around £13 per day – right up to £30+.
In the UK, car insurance is regulated by the Prudential Regulatory Authority (PRA), which is part of the Bank of England and the The Financial Conduct Authority (FCA). Car insurance complaints may also be dealt with by the financial ombudsman service.