What Is Insurance Excess?

When you apply for motor insurance, you will undoubtedly feel a bit overwhelmed by the array of terminology that you are faced with. It is vitally important that you fully understand what you are getting yourself into.

One of the terms that you will hear is the excess. The excess on your motor vehicle is the amount that you pay into the insurance company when you have an accident. Technically, it is the first amount that you will pay for the repairs or replacement of your vehicle. This figure is almost totally dependant on you, although what you pay for your excess is calculated by the insurance company based on a range of factors.

The thing with excess is that the higher you make your excess, the lower your motor insurance premiums will be each month. This is because the insurance company will have the reassurance that should you need to claim, they will not have to pay out too much on their own. If you have decided to take out a high excess, meaning that you are going to pay out a larger sum should you have an accident, then you need to make provisions for this. Seeing as your premium will be a lot lower each month, you need to save aside some money in the case you need to claim and pay out. It can be difficult to come up with a huge amount of money on demand like that, so it is always a good idea to have a bit of savings aside should this happen.

Some items on your motor vehicle insurance policy will have compulsory excess. You will be given a detailed breakdown of what you are going to pay excess for. There is no set amount for this excess and the amounts can vary depending on the item that is being repaired or replaced.

You can then take out voluntary excess, meaning that you know what you are going to pay in for. You will also have the peace of mind in knowing that you will have a lower premium to pay monthly. As mentioned above, you do have to be financially responsible and save aside some money in case you ever have to pay out a large amount of excess.

It is important that you read the finer details of your insurance policy. Being a higher risk person to insure could contribute to you having to pay a higher excess on your compulsory excesses. You need to do your research and find out how you are a high risk and how you can lower your risk profile. Furthermore, you also need to gauge whether or not minor fender benders are worthy of claiming for. For example, if you have a cracked light, it could be cheaper to pay for the repairs yourself rather than claiming, as the cost of the excess will cost more than if you paid for the repairs without claiming. In addition, you would also not want something so small giving you a higher insurance premium every month.