What is Car Insurance Excess and how much should I pay?

If you’ve taken out car insurance at any point in the past few years – or any other form of insurance - you may have noticed that often not-insignificant figure called the excess. Some excess is considered voluntary, while others are a requirement – but whichever types are defined, this number offers a way to reduce your car insurance premium. For a price. Read on to find out more about what car insurance excess is, and how much you should consider including as your excess next time your renewal comes around:

What is car insurance excess?

Car insurance excess is a specified, fixed amount that you’ll have to pay should you need to claim on your car insurance. When you apply for your coverage in the first place, you’ll notice that a required excess is included with many policies. You can then choose to add on a voluntary excess if you wish. This means that when you need to claim against your insurance, you need to pay that amount out while the insurance company covers the rest. Say, for example, you get into an accident, and the claim you need to make for repairs is £1500. If you have an excess of £400, your insurance company will cover £1100 of the costs, and you’d have to cover the remaining amount. However, should the accident not be your fault, this excess may not apply – it’s essential to check the T’s and C’s of your specific company to figure out how it all works individually. Still, the general rules for excess are the same everywhere.

The different types of excess

As we briefly mentioned above, two specific types of excess can be included as part of your car insurance plan. Compulsory, or required, the excess is defined by your insurer and is a generic part of many insurance policies. These can run to anything from nothing for long-term, experienced no-claims drivers to as much as £750 or more for brand-new, young drivers or those with plenty of claims. This figure is calculated on risk. If your insurance company thinks you’re going to be in accidents more, they want to ensure they aren’t covering everything. Voluntary excess is something a little different. This is the amount you’re willing to pay, as opposed to the amount you have to pay. Many drivers use a higher excess figure as a way to reduce their insurance overall, as they’re telling the insurance company they will pay out for the vast majority of smaller bumps and scrapes. Voluntary excess is on top of compulsory excess, which means they add up to form one total. If you get in a scrape that sets you back £1000, and you have a compulsory excess of £250 and a voluntary excess of £500, your insurance company would pay out £250 to bring you to that total. Which is worth remembering before you decide to ramp up the voluntary excess by hundreds.

How much should I pay in excess?

The big question is: how much should you pay when it comes to car excess? No matter what, you’ll have to cover that compulsory amount, so that’s the first factor to consider. The next thing that’s worth thinking about is if you have the means to pay out if necessary. For example, if your car got broken into twice in one year, and your combined excess was £800, would you be able to pay that without falling into hardship? In many cases, it’s well worth pumping up that voluntary excess to pay less on your car insurance overall. But unless you have a nice, save lump sum in your savings account, don’t go overboard. Opt for an extra couple of hundred pounds if it seems more affordable. It’s also worth knowing that you don’t have to claim on any accident. While you have to let your insurer know, you can always pay out yourself if necessary. There’s no one answer set in stone of how much you should pay for your excess. It all depends on personal circumstances. So figuring out what’s right for you is the first step to finding insurance that’s matches your needs – especially when it comes to that all-important excess figure that you’ll need to pay out on.