A car accident on its own is a traumatising thing to experience. Luckily, car insurance can alleviate much of the stress and expenses that follow a car accident.
But what does car insurance excess mean? Is this any different for temporary car insurance, and why are we expected to pay the excess when you make a claim?
In this article, we will guide you through the ins and outs of car insurance excess.
Everything you need to know about car insurance excess
What is car insurance excess?
Excess is the amount of money the insurance policyholder will have to contribute to an insurance claim on their car.
As the person insured, you will pay the excess stated on your car insurance policy if you need to make a claim. A car insurance policy may feature a voluntary excess (an amount you can voluntarily pay) and a compulsory excess (an amount you are required to pay when making a claim).
As the driver or owner of the vehicle, you will be responsible for the agreed compulsory excess amount.
What is the difference between compulsory and voluntary excess?
Car insurance excess is the excess amount of money you need to pay when you claim your car insurance. So, what’s the difference between compulsory excess and voluntary excess?
Compulsory excess is the set amount you need to pay when making a claim. The amount will have been agreed with your insurance provider before you took out your policy. It cannot be changed, so make sure you compare quotes before choosing car insurance. Your policy documents should have the compulsory excess amount stipulated, so read these carefully.
Your insurance provider determines the compulsory excess amounts you need to pay by assessing your portfolio and other listed drivers’ portfolios.
The compulsory excess amount you need to pay will depend on your car’s model, the number of years that you have been a licensed driver, your experience, and your age group.
Your insurance company will apply the above criteria to yourself as the primary driver and other named drivers listed on your car insurance premium to determine how much excess you have to pay.
You might be charged a higher compulsory excess depending on various factors that we will delve into later in the article.
Voluntary excess is the amount of excess that you want to pay towards your insurance claim alongside your compulsory excess.
Your insurance provider determines the compulsory excess, and you, as the insured, will determine the voluntary excess you pay for your claims. So, the total excess amount that you pay towards voluntary excess is up to you for the most part.
The voluntary excess amount can be viewed as an additional excess amount. Why? You can pay an excess of 0% towards the voluntary amount. The amount of voluntary excess that you pay is completely up to the insured. However, if you pay a higher voluntary excess towards your premium, you will automatically reduce the overall cost of your insurance premium.
Keep in mind that you’re responsible for the compulsory and voluntary excess. A higher excess can be beneficial if you can pay an excess immediately after claiming. However, if your disposable income is not as flexible, you might struggle to pay the total excess.
Once you and your insurance provider have agreed on a voluntary and compulsory excess amount, it cannot be changed. It is important to ensure that you can afford the total excess.
If you have an accident and decide to claim on your insurance and cannot afford to pay the excess, it presents several problems. If your vehicle is being repaired, a part of the repair bill will be paid using the car insurance excess. Your car will not be returned if you cannot afford to pay the excess.
Why is there an excess on insurance policies?
Insurance excess is in place to protect you and your car insurance providers, and it helps you make an informed decision when you claim your insurance. As the insured, you do not want to make a claim unnecessarily on your car insurance as it reflects negatively on you as a driver and as a potential new client for another insurance company.
If you try to switch insurers, the insurance companies you are applying to will scrutinise your claims history, and potential clients with too many car insurance claims are considered higher-risk clients. Potentially higher-risk clients can be rejected for an insurance policy.
Therefore, car insurance excess is attached to insurance claims, adding an extra financial obligation to you as the insured. So, you might reconsider whenever you want to make a claim because it can affect your no-claims bonus and claims discount. And you might even drive even more carefully.
In the end, car insurance excess benefits insurance providers and their clients.
How do payments for car insurance excess work?
You have to pay the excess in insurance claims even if you are not in the wrong. The other driver’s car insurance provider should reimburse you. But, if the other driver doesn’t have a car insurance provider or if they go missing, you won’t be reimbursed for the excess insurance costs. This is why legal protection is important.
Most car insurance premiums should give you the option of having legal cover car insurance. This should cover your legal cost if you make a claim or another driver claims against you.
Your insurance provider should be able to add a legal cover to your car insurance policy, but you might need to pay an additional cost.
Car insurance legal protection can help you save money as you won’t need to pay legal fees if a car insurance claim escalates to a court case.
Cost and implications of insurance excess
Now that we’ve established that voluntary and compulsory excess is the total amount of money you pay towards your claim in the event of an accident let’s discuss the money matters.
If you are a young driver, chances are you have less protection in your insurance policy. Younger drivers are considered to be at higher risk due to their inexperience as drivers and may claim more as a result.
As a younger driver, you might not have much money or flexibility with your premium due to your age disadvantage, and you may even settle for cheaper insurance for this reason. It is possible to get a great quality insurance provider as a young driver, i.e. if you’re under 25.
Simply ensure that you can pay your monthly premiums and that you can afford the chosen voluntary amount towards your car insurance excess. You can never be completely prepared for an accident, so it’s best to save money where you can, just in case you need to claim.
Individuals with stable incomes, more options for insurance premiums, and better vehicles are offered superior deals because they present less risk for insurance companies. For example, someone with a high-performance car can negotiate for a reduced compulsory excess amount as they are less likely to claim and can typically afford to pay a higher voluntary excess.
The amount of voluntary excess you choose to pay should depend on your preferences, financial stability, savings, and disposable income.
Is it better to have high or low excess?
Choosing to have a high or low voluntary excess is down to a personal choice. Deciding to opt for a high voluntary excess may lower the cost of your car insurance overall, however, it doesn’t come without risks.
If you do choose to go for high voluntary excess, you need to ensure you can pay the voluntary and compulsory excess in the event of a claim. Otherwise, you could find yourself in a difficult position with a large bill to pay.
Do I pay the excess if I am not at fault?
Yes, but you can apply to be reimbursed through your insurer. Your insurer will contact the insurers of the owners of the other vehicles, who will be held liable for repayments.
Do temporary car insurance companies charge excess?
Yes, temporary car insurance companies do charge excess as well. At GoShorty, we offer low excess on our temporary car insurance.
Discover the right car insurance policy for you
Voluntary and compulsory excess are an important part of any car insurance policy. Both amounts are something you need to consider carefully before taking out an insurance policy on your vehicle.
At GoShorty, we specialise in short term car insurance policies which are perfect for temporary cover. We’ve got a range of policies to choose from, including temporary van insurance and learner driver insurance.