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How does car insurance excess work?

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.

Other related FAQs

Looking for more related content to this? We’ve picked a selection of related topics that you may find helpful

Backdating car insurance cannot be done under any circumstances. Since it is a criminal offence to do so, you will not find any broker or insurance company who will be able to do this for you.

If you’ve had an accident of any kind, you’ll need to report it to your insurer soon afterwards. When you do, they’ll seek a detailed explanation of what’s happened and assess the damage done to your car. When they have a clear understanding of what’s occurred – and assuming you have fully comprehensive cover, they’ll arrange to repair your vehicle – or pay its market value if it’s written off.

A no claims bonus is a discount that’s applied after your insurance premium is calculated by a car insurance provider. The discount doesn’t stop your premium from going up; instead, it simply gives you a percentage off your premium – and that discount grows with every claim-free motoring year you have.

There are a number of reasons why car insurance quotes can change, such as if you’ve recently changed your address, or for reasons out of your control, like government tax increases.

Put simply, the reason why car insurance is high is because the cost of claims is high. As a result, insurers increase premiums to protect themselves and make a profit.

Insurers generally do not offer the facility to put your car insurance on hold – and cancelling and restarting your car insurance cover rarely makes financial sense. If you’ve got a reason for needing a break in cover, talk to a specialist company who cater for your circumstances – like classic car insurers or student policy providers.

Car insurance is usually calculated based on the likelihood of you making a claim in the future. A range of factors are taken into consideration too, such as age, occupation, your driving history and the details of your vehicle.

Car insurance can go up for a number of reasons – especially if you’ve had an accident or received a fixed penalty in the last year. If you haven’t, you might find you’re just getting a poor deal when your deal automatically renews – so don’t be afraid to shop around until you’ve got a better price.

You can be insured to drive a car on a policy in someone else’s name. This can be done by being a named driver on someone else's policy either permanently or for a short period.

Unfortunately, making any kind of insurance claim will often increase your renewal premium – even if the accident wasn’t your fault.