Insurance excess - what is it, exactly?

When it comes to insurance, excess is a term that usually goes with it. But what exactly is excess? And how does it work? 

What is excess?

In your insurance policy, the excess is the amount of money that you will need to contribute when you make a claim. For example, if you have a $1,000 excess and you make a claim for $10,000, you will need to pay $1,000, and your insurance provider will cover $9,000.

Designed to keep the cost of claim management down and to keep insurance premiums affordable, an excess is also a good way to incentivise people to take care of their possessions. If you knew you needed to pay a $1,000 excess on any damage to your items, you might be a bit more careful with how you use them!

When do I need to pay excess?

You’ll usually need to pay your excess amount whenever you make a claim. Not every insurance policy has excess you’re required to pay, it depends on the amount you chose when you took out your policy. Typically, the higher the excess, the lower your overall premiums.

Your policy wording should also tell you when you might not need to pay your excess, depending on your provider and the circumstances. For example, if you have a car accident, some providers may waive the excess if you aren’t at fault.

If you’re not sure how much excess you need to pay, take a look through your policy wording or get in touch with a financial adviser for help.

Are there different types of excess?

There are a few different types of excess, so it’s best to seek advice from the professionals if you have questions about the excess in your policy.

Basic/Standard Excess

As the name suggests, this is a standard excess that would apply to any claim. Different insurance providers will have varying amounts of standard excess.

Voluntary Excess

As we mentioned before, you can choose to make your excess higher in order to lower your premiums - this is called voluntary excess. This can be a good option if you don’t think you’ll make many claims and will have the money available to pay your excess if you do need to make a claim.

Imposed Excess

This type of excess can be set by your insurance provider when there is a higher risk involved. This might come into play if you are insuring a home that is often unoccupied, or a model of car that’s a common target for thieves.

Age/Licence Excess

This type of excess applies to car insurance policies. You may need to agree to a higher excess if you want to allow certain people to drive your car - for example, someone who is under 25, or someone who doesn’t have a full licence. In these situations, you might need to pay a higher excess in addition to your standard excess should something go wrong.

If you want to know more about how excess works, get in touch with us today and we can help you make sure you’ve got the right cover in place when you need it.