It’s a common scenario: you’re shopping for car insurance, and one quote looks significantly cheaper than the others. You might be tempted to snap it up. But what if that lower price comes with a hidden catch? Many drivers don’t fully grasp the details of their car insurance policy, especially when it comes to the excess. In fact, only 49% of motorists understand what both voluntary and compulsory excesses mean.
This lack of understanding can lead to nasty surprises when you need to make a claim. Some drivers are shocked by the total amount they owe, and a significant number admit they couldn’t afford to pay it. Understanding these terms is crucial, not just for finding the cheapest policy, but for ensuring you have adequate cover when you need it most. Here’s what you actually need to know.
What is car insurance excess?
Your car insurance excess is made up of two parts: a compulsory excess and a voluntary excess. These are added together to create the total amount you must pay towards any claim. The compulsory excess is fixed by your insurer and cannot be altered. It’s a non-negotiable part of your policy. The voluntary excess, however, is an amount you choose. You can often reduce your annual premium by agreeing to pay a higher voluntary excess. This is a common way insurers try to make their quotes look more attractive on comparison sites. However, it’s vital to remember that these two amounts are added together. Seven percent of drivers surveyed didn’t realise this, and found the combined figure to be a shock.
If I were looking at a new policy, my first step would be to find the total excess amount. I’d then check if I could realistically afford to pay that sum if I had to make a claim. This helps avoid nasty surprises later on.
Why understanding your car insurance excess matters
The total excess on your policy is a critical factor in your overall car insurance costs, especially when making a claim. For many, it’s not just a small deduction; it’s a significant sum. Just under a third (32%) of drivers expected to pay an excess, but 12% were surprised by the amount they actually had to pay. This surprise can be substantial, with 10% of drivers finding their excess was more than anticipated. For some, this can be a real financial burden; 7% of drivers admitted the combined excess was unaffordable, and 8% stated they couldn’t afford to pay their excess if they needed to make a claim tomorrow.
The cost of compulsory excesses has been rising. For theft claims, the average compulsory excess increased by 47% in just one year, from £182 to £267. Accidental damage and fire claims saw similar increases of around 26%. These figures highlight a trend where insurers might be increasing compulsory excesses to offset other costs, or perhaps to make their headline premiums appear lower. This means the amount you might have to pay out of pocket can change significantly year on year, even if your voluntary excess remains the same.
A steep excess can bring down the headline cost of a policy, but it can leave drivers owing more than they can afford in the event of an accident. For instance, one driver found policies with a £400 compulsory excess plus a £250 voluntary excess, making a total of £650. If that driver had to make a claim, they would need to find that £650 upfront. The temptation to increase the voluntary excess to lower the premium is strong. One driver managed to reduce his premium from £1,296 to £1,031 by increasing his excess to £850. However, a saving made due to a particularly high excess might have to be repaid several times over if a claim is later made. For example, removing the voluntary excess on one policy caused the price to leap up significantly, and to reduce a £400 compulsory excess, one driver was quoted £3,000 for her cover.
Common misunderstandings about car insurance excess
Drivers underestimate their total excess liability
A significant number of drivers simply don’t grasp the full financial commitment when they agree to an insurance policy. Six in ten drivers admit they do not fully understand the meaning of compulsory and voluntary excess. This means six in ten drivers could face a shock if they need to make a claim. The core issue is often the failure to add the two figures together. For example, if your car insurance excess is £250 and you make a claim for £1,000, the insurer typically keeps the first £250, leaving you with £750. But if your compulsory excess is £400 and your voluntary excess is £250, your total liability is £650, not £250. This is a crucial distinction that many overlook.
Younger drivers often face higher compulsory excesses
Insurers assess risk differently based on driver profiles. Young or inexperienced drivers may have a higher compulsory excess than older, more experienced drivers. This is because they are statistically more likely to be involved in an accident. This means that even if two drivers have the same car and live in the same area, the younger driver might have a higher compulsory excess built into their policy, increasing their potential payout in the event of a claim. Additional excess may also be payable if a car is considered luxury or high-performance, as these vehicles can be more expensive to repair or replace.
If I were a younger driver or driving a high-performance car, I’d want to see if I could reduce the compulsory excess by choosing a policy with a higher voluntary excess, provided I could afford that higher voluntary amount. This could offer a more predictable total excess.
Insurers may use high excesses to manipulate quotes
There’s a suspicion that some insurers use high compulsory excesses to make their initial quotes appear cheaper on price comparison websites. While a higher excess does reduce the premium, it shifts the financial risk onto the policyholder. This practice can be misleading, as the true cost of the insurance is not fully apparent until a claim is made. It’s a classic case of a short-term saving potentially leading to a long-term financial problem. It’s important to look beyond the initial price and understand the full implications of the excess amounts.
Making informed choices about your car insurance excess
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Compare total excess amounts, not just premiums
When shopping for car insurance, don’t just focus on the headline premium. Always check the total excess you would be liable for. This means adding the compulsory and voluntary excesses together. A policy that seems cheaper upfront might have a much higher total excess, which could be a problem if you need to make a claim. Look for policies where the total excess is manageable for your personal finances. If I were comparing quotes, I’d make a note of the total excess for each one, alongside the premium, to get a clearer picture of the overall cost.
Adjust your voluntary excess strategically
Your voluntary excess is your main tool for influencing your premium. If you want to lower your annual cost, you can increase your voluntary excess. However, you must be realistic about what you can afford to pay if you make a claim. For example, increasing your voluntary excess from £200 to £500 might save you money on your premium, but you need to be sure you have £500 available if needed. Conversely, if you have a significant amount saved, you might consider a higher voluntary excess to secure a lower premium, knowing you can cover the cost if necessary. It’s a balancing act between upfront savings and potential claim costs.
→ Scroll right to see all columns
| Voluntary Excess | Potential Premium Saving | Total Excess if Claim |
|---|---|---|
| £200 | Moderate | Compulsory + £200 |
| £500 | Significant | Compulsory + £500 |
| £1,000 | Substantial | Compulsory + £1,000 |
Consider excess protection insurance
Some insurers offer excess protection insurance as an add-on. This is a separate policy that covers the excess amount you have to pay if you make a claim on your car insurance. It’s essentially a way to protect yourself from the financial impact of your excess. While it adds another cost to your overall insurance, it can provide peace of mind, especially if you have a high voluntary excess or are concerned about your ability to pay it. This is a practical step if you’ve opted for a lower premium by increasing your voluntary excess but worry about the potential payout.
Use technology to mitigate risks
While not directly related to the excess amount itself, using technology can help reduce the likelihood of needing to make a claim in the first place. Dash cams, for example, can provide evidence in the event of an accident, potentially helping to prove fault and avoid claims that could impact your excess. A Garmin Dash Cam X110 can record your journeys in high definition, offering a valuable record of events. Similarly, GPS trackers can help recover stolen vehicles, reducing the chance of a theft claim. Investing in a SmartFleet AT202 4G Vehicle Tracker could offer peace of mind for vehicle security.
Frequently Asked Questions
Can I negotiate my compulsory excess? ▾
What happens if my claim is less than my excess? ▾
Does my excess affect my no-claims bonus? ▾
Can my excess change during the policy year? ▾
Is a higher excess always cheaper? ▾
Understanding your car insurance excess is not just about finding the cheapest initial quote. It’s about ensuring you have a policy that offers adequate protection without leaving you financially exposed if you need to make a claim. Always add your compulsory and voluntary excesses together to understand your total liability. If this was useful, you might also want to read How to choose the right car insurance in the UK.
Sources and Further Reading
Car insurance excess: what you need to know. Which?, 2023.
Car insurance excess explained. Confused.com, 2024.
How to choose the right car insurance in the UK — if you want to act on what this article covers, this breaks down the comparison process step by step.
Average Car Insurance UK. NimbleFins, 2024.
