Choosing the right home insurance excess can feel like a balancing act. You want to keep your premiums as low as possible, but you also need to be sure you can afford to pay the excess if you need to make a claim. It’s a common point of confusion for many homeowners and renters across the UK.
Understanding how much you should set your excess at is crucial. It directly impacts your monthly outgoings and your financial readiness for unexpected events. With premiums fluctuating and insurers looking for more evidence of good maintenance, getting this right is more important than ever. Here’s what you actually need to know.
What I tend to notice is that many people focus solely on the premium cost, forgetting the significant role the excess plays. It’s essential to consider both together to find a truly cost-effective policy. If you’re looking to get a better handle on your overall property insurance, you might find our guide on unmasking property insurance loopholes a useful read.
Understanding Property Insurance Excess
In simple terms, your home insurance excess is the amount of money you agree to pay towards any claim you make. Think of it as your contribution to the cost of a repair or replacement. Insurers use excesses to reduce the number of small claims they have to process and to encourage policyholders to take care of their property.
There are usually two types of excess you’ll encounter: the compulsory excess and the voluntary excess. The compulsory excess is a fixed amount set by the insurer for certain types of claims. For example, insurers might have a compulsory excess for subsidence or flood claims, which are often higher due to the significant risk and cost involved. The voluntary excess is the amount you choose to add to the compulsory excess. This is where you have more control over your premium.
By increasing your voluntary excess, you are telling the insurer that you are willing to bear a larger portion of the initial cost if something goes wrong. This reduces the insurer’s risk, and they typically reflect this by lowering your annual premium. Conversely, if you opt for a lower voluntary excess, your premium will likely be higher.
My first move when reviewing a policy would be to check the total excess – the sum of the compulsory and voluntary amounts. This gives you the real figure you’d need to cover if you made a claim.
Why Your Excess Matters
The amount of excess you choose has a direct impact on your financial situation, especially if you need to make a claim. If you set your excess too high, you might struggle to afford the payout when you need it most. This could leave you in a difficult position, unable to repair your home or replace damaged belongings.
For instance, if your home insurance policy has a total excess of £1,000 for accidental damage, and you need to claim for a repair that costs £2,000, you would pay the first £1,000, and the insurer would cover the remaining £1,000. If you only had £500 readily available, you’d be short of the amount needed to settle the claim, potentially delaying repairs or leaving you with debt.
It’s also worth noting that different types of claims can have different excesses. For example, a claim for storm damage might have a different compulsory excess than a claim for a burst pipe. Always check your policy documents carefully to understand the specific excesses that apply to each type of cover you have.
What I’ve seen is that people often underestimate the cost of repairs. Setting an excess that aligns with your available savings is a practical approach. If you’re unsure about the specific terms and conditions of your policy, consulting with a financial advisor can provide clarity.
Common Mistakes with Home Insurance Excess
Many people make the mistake of setting their voluntary excess too high in pursuit of the lowest possible premium. While saving money on your annual premium is appealing, it can lead to significant financial strain if you need to make a claim. For example, if your annual premium is £391, and you increase your voluntary excess by £500 to save £50 on your premium, you’ve essentially traded a £50 saving for a £500 increase in your out-of-pocket cost if you claim.
Setting an Unaffordable Voluntary Excess
This is perhaps the most common pitfall. People often choose a voluntary excess that looks attractive on paper, perhaps £500 or £1,000, without truly assessing if they could comfortably afford to pay that amount from their savings in an emergency. If you have limited savings, a high voluntary excess could mean you can’t afford to make a claim, defeating the purpose of having insurance. It’s crucial to only select a voluntary excess that you can realistically pay without causing financial hardship.
Ignoring Compulsory Excesses
Some policyholders focus only on the voluntary excess they can control and overlook the compulsory excesses set by the insurer. These compulsory amounts can significantly increase the total excess you’d have to pay. For instance, a policy might have a £200 voluntary excess for standard claims, but a £1,000 compulsory excess for subsidence. If subsidence occurs, your total excess would be £1,200, not just £200.
Not Reviewing Excesses Regularly
Your financial circumstances can change. What was an affordable excess a few years ago might not be now. It’s important to review your home insurance policy annually, including the excess levels. If your savings have decreased, or you’ve taken on new financial commitments, you might need to lower your voluntary excess, even if it means a slight increase in your premium.
Assuming All Excesses are the Same
Not all claims are treated equally. As mentioned, specific events like floods, subsidence, or even certain types of damage (like accidental damage to specific items) might have their own compulsory excesses. It’s vital to read the policy wording to understand the different excess levels that apply to various claim scenarios. For example, properties built before 1850 often face higher premiums and potentially higher excesses due to their age and construction materials.
What I’d do is calculate the total excess for each potential claim type and compare that to my emergency fund. If the total excess exceeds a significant portion of my savings, I’d look to reduce it, even if it means a slightly higher premium.
→ Scroll right to see all columns
| Property Type/Age | Average Annual Premium | Notes |
|---|---|---|
| New builds (2000 onwards) | £280 | Lowest average premiums |
| Properties built before 1850 | £800+ | Higher premiums due to age |
| Buildings Cover (Q2 2025) | £265 | Average |
| Contents Cover (Q2 2025) | £99 | Average |
| Contents Valued £0-£10k | £132 | Median top annual premium |
| Contents Valued £75k+ | £282 | Median top annual premium |
| Contents Valued £75k+ (Average Top) | £432 | Higher average for high-value contents |
Making the Right Choice for Your Excess
Deciding on the right excess level involves a careful assessment of your personal financial situation and your risk tolerance. It’s not a one-size-fits-all answer. The goal is to find a balance that provides adequate protection without leaving you financially vulnerable.
Assess Your Financial Resilience
Before you choose a voluntary excess, take stock of your savings and emergency funds. How much could you realistically afford to pay out of pocket if you needed to make a claim tomorrow? If you have £5,000 in savings, a £1,000 excess might be manageable. If you only have £1,000 in savings, a £500 excess might be the maximum you can comfortably commit to.
Consider the Type of Cover
Different types of home insurance cover have different risks and therefore different excesses. For example, flood cover might have a higher compulsory excess than standard accidental damage cover. If you live in a flood-risk area, you need to be particularly aware of this. Similarly, properties in areas with high burglary rates, such as Kensington and Chelsea with 7.09 incidents per 1,000 residents, might have specific excesses related to theft or malicious damage.
Factor in the Premium Savings
While affordability is paramount, it’s also wise to understand the premium savings you achieve by increasing your voluntary excess. Use online comparison tools to see how much you can save by increasing your excess by £100, £200, or £500. Then, compare that saving to the increased amount you would have to pay if you made a claim. For example, saving £50 a year on your premium by increasing your excess by £500 means you’d need to make a claim within 10 years just to break even on that specific increase.
Seek Professional Advice
If you’re still unsure, don’t hesitate to speak with an insurance broker or a financial advisor. They can help you assess your needs and recommend appropriate excess levels based on your circumstances. They can also explain the nuances of different policy wordings and excesses. For instance, if you own a property with unique features or historical significance, you might need specialist advice, as outlined in our guide to heritage property insurance.
What I’d do is look at the potential savings versus the increased risk. If the savings are minimal, I’d stick with a lower excess. If the savings are substantial, I’d ensure I have the funds to cover the higher excess before committing.
For example, if you are considering a higher excess to save on your premium, ensure you have the funds readily available. A smart water leak detector could help prevent claims related to water damage, potentially saving you from ever needing to pay your excess for such an event.
Frequently Asked Questions
What is the difference between compulsory and voluntary excess?▾
Can I change my excess amount mid-policy?▾
What happens if my claim is less than my excess?▾
How much should my voluntary excess be?▾
Does a higher excess always mean a lower premium?▾
Choosing the right excess is a personal decision that balances cost savings with financial preparedness. By understanding the different types of excesses and carefully assessing your own financial situation, you can make an informed choice that protects your home and your finances.
If this was useful, you might also want to read Understanding Property Insurance Terms in the UK.
Sources and Further Reading
Understanding Coastal Rental Home Insurance Basics — This article provides insights into the specific considerations for properties in coastal areas, which often have unique insurance needs and potential excess implications.
Essential Tips for Property Insurance in Conservation Areas UK — Properties in conservation areas may have specific building regulations or restrictions that can affect insurance, including excesses.
2026 Property Market Outlook. RPS Insurance, 2026.
Home Insurance Statistics UK. Uswitch, 2025.
UK Property Insurance: What’s Changing in 2026?. Cape Insurance, 2026.
