What is an insurance excess?
When it comes to insuring your vehicle, the terms ‘compulsory excess’ and ‘voluntary excess’ often crop up - but what is car insurance excess?
An ‘excess’ is the initial amount you must pay yourself if you are making a claim on your car insurance policy. Excesses are not limited to just car insurance – they are usually payable on most types of insurance policy.
What is a car insurance excess?
There are two different types of car insurance excess – compulsory and voluntary. As the name suggests, compulsory excess is decided by your insurer and applied to your policy.
Voluntary excess works slightly differently, because the amount depends on how much excess you’re willing to pay. You can often decrease the cost of your insurance policy by choosing to pay a slightly higher excess amount than standard, and vice versa.
The excess payment is often deducted from the final amount paid to you by your insurer in settlement of your claim. However, some insurers may require you to pay the excess directly to them at a different time, or to pay the excess to a contractor involved in the repair of your vehicle. Your insurer will confirm to you how much they require you to pay, who you need to pay it to, and when it needs to be paid.
Before making a claim on your car insurance policy, it is sensible to consider the amount of your excess payment. Say, for example, you have to pay an excess amount of £250 and the cost of the damage to your vehicle is £255 (assuming no other vehicles are involved).
You might not feel like it’s worth making a claim on your insurance policy, as the claim may affect your No Claims Bonus (NCB) to a much greater value than the damage to your car. Dependent on your insurer, you may be able to choose the amount of your excess payment. Make sure this is an amount you can afford if you do need to make a claim.
If someone claims on your insurance, do you pay the excess?
In short, no. Your excess – both voluntary and compulsory – is the amount of money you pay towards your own claims or repairs. So, you won’t need to pay the excess if a third party is claiming against you. Whether you were to blame or not, you are obliged to let your insurance provider know about the incident. If your insurance provider finds out about the accident, they may cancel your policy or refuse to pay out on a future claim.
If you make a claim under your car insurance policy, you will usually lose some, or all, of your NCB. However, if you have an accident and are deemed to not be at fault, your NCB will not usually be affected. If both parties are at fault, then usually the NCB of both drivers will be affected.
If you are a named driver on a vehicle (rather than the policyholder) it is unlikely that you will be able to build up your own NCB.
You may have the option to pay extra on your insurance policy to protect your NCB. This means that, even if you make a claim on your car insurance policy, you will keep the NCB that you have accrued to date. However, this does not necessarily mean that your premium will not increase over time. Insurers will usually take account of your claims history when calculating the cost of your insurance. The NCB would then be deducted from the cost at the end.
However, it’s worth bearing in mind that, even if you choose to ‘protect’ your no claims bonus, it might be subject to a ‘step back’ should you have an accident. This essentially means that, instead of protecting all of your years of no claims bonus, your insurer may just ‘step back’ (reduce) the amount, usually by one or two years in line with your insurer’s ‘step back’ scale at the time of renewal.
What is excess protection?
When choosing a car insurance policy, you may want to consider adding excess protection as an optional extra. Excess protection will reimburse the cost of any excess you’ve had to pay up to the amount specified on your policy, ensuring you’re not left out of pocket following an accident.