Car insurance excess is a crucial part of your policy. It’s the amount you agree to pay towards the cost of any claim you make. Your insurer then covers the rest, up to your policy’s limit. Understanding how excess works is key to managing your car insurance costs effectively. It’s not always straightforward, and many people find it confusing.
There are two types of excess: compulsory and voluntary. The compulsory excess is set by your insurer and cannot be changed. The voluntary excess is an amount you choose to pay on top of the compulsory excess. This choice directly influences your car insurance premium. A higher voluntary excess usually means a lower premium. This is because you are taking on more of the financial risk yourself. Conversely, a lower voluntary excess typically leads to a higher premium.
What is Car Insurance Excess?
Car insurance excess is the fixed amount you contribute when you make a claim. Your insurer covers the cost above that amount, up to the policy limit. The average excess in the UK typically falls between £100 and £500, but this can vary. For example, young or new drivers often face higher compulsory excesses, sometimes £300 to £500 or more. This can push the total excess on some policies to over £1,000.
If you have a claim of £1,200 and your total excess is £500, your insurer would pay £700. However, if your claim is £400 and your total excess is £500, your insurer would pay nothing, as the claim amount is less than your excess. In such cases, it’s usually pointless to make a claim.
If I were in this situation, I’d check the cost of the repair first. If it’s close to or less than my total excess, I’d consider paying for it myself to avoid losing my no-claims discount.
Why Excess Levels Affect Your Premium
The voluntary excess you agree to has a direct impact on your car insurance premium. This is a fundamental principle of insurance. By choosing a higher voluntary excess, you are essentially telling your insurer that you are willing to bear more of the financial burden in the event of a claim. This reduces the insurer’s risk, and they reflect this by lowering your premium. It’s a trade-off: you pay less upfront for your insurance, but you commit to paying more if you need to claim.
Conversely, opting for a lower voluntary excess means the insurer takes on more risk. They will charge you a higher premium to compensate for this increased exposure. For drivers with a good driving record and who are confident in their ability to avoid accidents, a higher voluntary excess can be an effective way to save money on their annual insurance costs. It’s a strategic decision that balances ongoing costs against potential future expenses.
The relationship is quite clear: a lower voluntary excess means a higher premium, but a lower out-of-pocket cost if you need to make a claim. The opposite is also true: a higher voluntary excess means a lower premium but a higher out-of-pocket cost if a claim occurs. This is why understanding your financial situation and risk tolerance is so important when setting your voluntary excess.
It’s worth noting that only about 49% of motorists fully understand the meaning of voluntary and compulsory excesses. This lack of understanding can lead to unexpected costs. For instance, 7% said they didn’t realise compulsory and voluntary excesses would be added together. This highlights a common misunderstanding that can catch people out when they need to make a claim.
If I were a young driver, I’d pay close attention to the total excess amount shown on quotes. I’d ensure it was an amount I could realistically afford, even if it meant a slightly higher premium. It’s better to have a manageable premium and a known claim cost than a cheap policy I can’t afford to use.
Common Mistakes When Setting Your Excess
Setting Excess Too High for a Lower Premium
One of the most frequent errors people make is setting their voluntary excess very high simply to achieve a lower insurance premium. While this can indeed reduce your annual cost, it becomes a significant problem if you then cannot afford the total excess when you need to make a claim. For example, if your compulsory excess is £250 and you choose a voluntary excess of £200, you are committing to paying £450 before your insurer contributes anything towards a claim. This is a common mistake because it prioritises immediate savings over the ability to use the insurance when it’s needed most.
Ignoring the Compulsory Excess
Another mistake is focusing solely on the voluntary excess and forgetting about the compulsory amount. The total excess is what matters when you claim. If your compulsory excess is £150 to £300, and you add a voluntary £200, you’re looking at £350 to £500. Some younger drivers face compulsory excesses of £500+, meaning their total excess could easily exceed £1,000. It’s essential to know both figures and add them together to understand your true out-of-pocket expense.
Not Considering the Claim Scenario
People sometimes fail to consider the types of claims they might make. Excess applies to accidents, theft, and vandalism. However, windscreen claims often have a separate, lower excess, which is a detail many overlook. If your repair cost is less than or close to your total excess, claiming is usually pointless. It’s important to consider if the potential payout from a claim justifies the cost of the excess and the potential loss of your no-claims discount.
If I were choosing my excess, I’d look at the total amount and compare it to the cost of minor repairs. If a small dent or scratch costs less to fix than my total excess, I’d seriously consider paying for it myself. This way, I keep my no-claims discount and avoid the hassle of a formal claim.
A significant number of motorists, 12%, have been surprised by how much their excess was. Another 10% claimed the excess was more than they expected to pay. This points to a widespread issue where people don’t fully grasp the financial commitment involved.
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| Driver Type | Typical Compulsory Excess | Potential Total Excess |
|---|---|---|
| Standard Driver | £150 – £300 | £200 – £500+ |
| Young/New Driver | £500+ | £700 – £1,000+ |
| Older Driver | May be higher due to risk | Varies |
| High-Performance Vehicle | May be higher than average | Varies |
How to Set Your Voluntary Excess
Assess Your Financial Situation
The most crucial step in setting your voluntary excess is honestly assessing your financial situation. You must be able to comfortably afford to pay the total excess amount if you need to make a claim. This means considering your savings and disposable income. Many younger drivers find it difficult to set a high voluntary excess because their savings are limited. Mature drivers, who often have more financial stability, are more likely to take advantage of higher voluntary excesses and the resulting lower premiums.
If I were in a position where I had a decent emergency fund, I’d consider increasing my voluntary excess. This could help lower my annual premium, and I’d have the confidence that I could cover the higher excess if needed. It’s about finding a balance that works for your personal finances.
Understand the Premium Savings
When you adjust your voluntary excess, your insurer will show you how it affects your premium. Take note of the savings offered by increasing your excess. For example, increasing your voluntary excess from £200 to £500 might knock £40 off your annual premium. Compare this saving against the extra £300 you would need to pay if you claimed. If the saving is minimal, it might not be worth the increased risk. Conversely, if a higher voluntary excess offers substantial savings and you can afford it, it could be a good option.
It’s also important to remember that a claim can remove 2–5 years of no-claims discount. If you have built up a significant no-claims discount, which could be worth £200–£400 off your premium each year, you need to weigh this against the excess you pay. If the insurer pays out less than the value of the NCD you’ll lose over the next few years, it might be better to pay for the repair yourself and not claim.
Consider Your Driving Habits
Your driving habits and history play a role. If you are a careful driver with a clean record, choosing a higher voluntary excess can typically save you money on ongoing premiums. Insurers see you as a lower risk. If you drive a lot in busy urban areas or have had previous claims, you might want to consider a lower voluntary excess to reduce your immediate out-of-pocket cost in case of an incident. Telematics car insurance, which monitors driving behaviour, can sometimes offer fairer excess and premium combinations to safer drivers.
For those looking to potentially reduce their insurance costs or protect their vehicles, a dash cam can be a useful tool. Devices like the Garmin Dash Cam X310 offer high-quality recording and features like parking guards, which can provide evidence in case of an accident or vandalism. This evidence could potentially help in a claim, influencing how your excess is applied.
When Not to Claim
It’s not always best to claim. If your repair cost is less than or close to your total excess, claiming is usually pointless. For instance, if you have a £500 total excess and the repair costs £450, you would pay the full amount yourself anyway. In such situations, it’s often better to pay for the repair yourself and not make a claim. This preserves your no-claims discount, which can be worth more over time than the immediate saving from a claim.
Frequently Asked Questions
What is the difference between compulsory and voluntary excess? ▾
Can I choose any amount for my voluntary excess? ▾
How does voluntary excess affect my car insurance premium? ▾
When should I consider paying for repairs myself instead of claiming? ▾
Does excess apply to every claim? ▾
Understanding your car insurance excess is vital for managing your policy and finances. By carefully considering your voluntary excess, you can find a balance that suits your budget and risk tolerance. This ensures your insurance provides the protection you need without unexpected financial strain.
If this was useful, you might also want to read Essential Tips for Car Subscription Insurance in the UK.
Sources and Further Reading
What is Voluntary Excess on Car Insurance? — Zego, 2024.
Car Insurance Excess Explained — Trust My Policy, 2024.
What is Voluntary Excess? — MoneyExpert, 2024.
Car Insurance Excess Explained — MyMoneyComparison, 2024.
Insurance Excesses Are Still Misunderstood — GoCompare Press Office, 2023.
UK Car Insurance Report 2026 — Brumble, 2024.
