When you’re shopping for car insurance, an important term you’ll find is “excess”. An excess is a type of contribution that you, (the driver), are required to pay towards a claim before the insurance company pays the remainder. Insurers may have various types of excesses. What applies in your case depends on the individual situation. When you are shopping for a car insurance plan, it’s important to choose an excess wisely.
Many insurers will allow you to select the level of excess you require. Thus by choosing a lower excess, you will have less to pay out of pocket in case of a claim, but your premiums will be higher, and if you choose a higher excess, your premiums will be lower, but you will be liable for more to pay out of pocket in case of a claim. For most people, this is the best way to control your premiums. That being said, however, there are some concerns to keep in mind. You should never select an excess that is too high. In case of an accident, when you need to make a claim on your policy, you will need to pay a higher amount out of pocket. There is a real risk of keeping your excess too high to achieve a greater of savings, but then struggling with the payment at the time of a claim.
An excess works by shifting some of the loss risk from the insurer to you, the driver. The amount of the excess is how much you will have to pay out of pocket before your insurance company does. As a result, insurance companies can reduce your premiums.
What Types of Excess Are There?
The type of excess you are liable to pay are specifically listed on your policy. Consider these types of excess:
Basic Excess: This applies to all claims. No matter the type of claim, you will pay the standard excess.
Age Excess: This generally applies in situations where the driver is under 25 at the time of making the claim. It may apply in other situations as well.
Age and Unlisted Driver Excess: When the driver involved in the incident is not listed on the policy directly, such as a casual driver, but is under the age of 25, this excess applies if it is included on the policy.
Age and Inexperienced Driver Excess: If the individual is over 25, but he or she does not have at least two years of driving experience, this type of excess applies if it is listed on your policy.
Additional Excess: In some cases, the insurance company may require a special or additional excess. This may be due to the vehicle or other circumstances related to previous claims.
In many situations, you do not have to pay the listed excess. This does not apply in situations where you are not liable in the accident. In that case, the driver at fault pays the losses. Carefully consider how much you can pay when selecting an excess limit. When choosing insurance, this directly impacts your costs.