Choosing the right property insurance excess is a balancing act. It directly impacts your annual premium and how much you’ll pay out of pocket if something goes wrong. Too low an excess, and your premiums might be higher than necessary. Too high, and you could face a significant bill if you need to make a claim. Finding that sweet spot is key to ensuring you’re adequately protected without overspending.
The amount you agree to pay towards a claim is known as your insurance excess. It’s split into two parts: compulsory and voluntary. The compulsory excess is set by the insurer and is non-negotiable. It’s based on factors like your property’s location and type of cover. The voluntary excess is the extra amount you choose to pay. By increasing your voluntary excess, you signal to the insurer that you’re willing to take on more of the initial financial risk. In return, they typically lower your annual premium. It’s a trade-off that requires careful consideration of your personal financial situation and risk tolerance. What I tend to notice is that many people overlook the voluntary excess, focusing only on the headline premium cost, which can lead to unexpected outlays later on.
Understanding these elements is crucial for making informed decisions about your home insurance. Here’s what you actually need to know.
Understanding Your Property Insurance Excess
When you take out buildings insurance, you’ll encounter two types of excess: compulsory and voluntary. The compulsory excess is the minimum amount your insurer will ask you to pay for a claim. For general damage, this can be around £250 with providers like Aviva, or sometimes as low as £150 with Direct Line. However, for more serious issues, the compulsory excess can be significantly higher. For instance, subsidence claims often have a compulsory excess of £1,000, and this is becoming standard practice, with some insurers even setting it at £1,500. Similarly, escape of water claims typically carry a mandatory excess between £400 and £800.
The voluntary excess is your choice. You can opt to pay more than the compulsory amount to reduce your annual premium. For example, choosing a voluntary excess of £300 could save you around £25 a year on your premium. Increasing it further to £500 might save you an additional £26 on buildings insurance alone. My first move would be to check the difference in premium for a few voluntary excess levels to see where the best savings are for my budget.
It’s important to remember that your total excess is the sum of your compulsory and voluntary amounts. If your total excess is, say, £500 (e.g., £200 compulsory + £300 voluntary), any damage costing less than that amount won’t be covered by your insurance. If you made a claim for £600, the insurer would only pay out £100 after deducting your excess.
Why the Right Excess Matters for Your Finances
The decision about your insurance excess isn’t just about saving money on premiums; it’s about managing your financial risk. UK property insurance payouts were expected to reach a record £6.1 billion in 2025, highlighting the significant claims being made. Claims related to adverse weather alone totalled £936 million in the first nine months of 2025, a 21% increase year-on-year. This means that while insurance provides a safety net, the cost of that safety net is influenced by how much risk you’re willing to absorb yourself.
Consider a scenario where a severe storm causes damage. If your total excess is high, say £1,000, and the repair bill comes to £1,500, you’ll be responsible for the first £1,000. This could be a significant unexpected expense. On the other hand, if your excess is low, your premium will be higher. The average annual cost for combined buildings and contents cover was £225 at the end of 2025, with projections suggesting it might fall to around £306 due to market competition. It’s about finding a balance that aligns with your ability to absorb a financial shock.
What I’d do is assess my savings. If I had a substantial emergency fund, I might opt for a higher voluntary excess to lower my ongoing costs. If my savings were limited, I’d lean towards a lower voluntary excess, even if it meant a slightly higher premium, to ensure any claim wouldn’t leave me out of pocket for a large sum.
It’s also worth noting that the Financial Conduct Authority (FCA) expects insurers to offer ‘fair value’ on their products. This means the price you pay should be reasonable for the cover you receive. When comparing policies, don’t just look at the premium; consider the total excess you’d be liable for in different claim scenarios.
Common Pitfalls When Setting Your Excess
Setting an Excess You Can’t Afford
One of the most common mistakes is choosing a voluntary excess that’s too high for your personal financial situation. While a high voluntary excess can significantly reduce your annual premium, it could leave you struggling to pay if you need to make a claim. For example, if your total excess is £1,000 and you experience a burst pipe causing £1,200 of damage, you’ll need to find that £1,000 yourself before the insurer contributes. This can be a significant burden, especially if it’s an unexpected expense.
Ignoring Specialist Excesses
Many policies have different excesses for specific types of claims. For instance, subsidence, flood damage, or escape of water might carry a higher compulsory excess than general wear and tear. It’s crucial to understand these specialist excesses. If you live in an area prone to subsidence, for example, a high compulsory excess of £1,000 or even £1,500 could apply. You need to be prepared for this potential outlay. Claims related to adverse weather, which includes floods, have seen a 21% increase in cost, making these specialist excesses more relevant than ever.
Failing to Compare Total Costs
People often focus solely on the annual premium when comparing insurance policies. However, the total cost of insurance includes the premium plus the excess you’d pay in the event of a claim. A policy with a very low premium but a high excess might end up being more expensive overall if you need to claim. Conversely, a slightly higher premium with a lower excess could be more cost-effective in the long run. For example, while increasing your voluntary excess to £500 can save you £26 on buildings insurance, you must be able to afford that £500 if a claim arises.
Overlooking the Impact on Small Claims
If your total excess is £500, any claim for damage costing less than that amount is effectively not covered by your insurance. You would pay the full repair cost yourself. This means that for minor issues, such as a small leak that costs £300 to fix, your insurance policy offers no financial benefit. It’s important to consider whether you’d be better off paying for small repairs out of pocket rather than making a claim that could potentially impact your future premiums or no-claims bonus. My first move when looking at a policy would be to calculate the total excess and then consider the smallest claim I’d realistically make and see if it’s even worth reporting.
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| Claim Type | Typical Compulsory Excess | Notes |
|---|---|---|
| General Damage | £150 – £300 | Varies by insurer (e.g., Admiral, Aviva) |
| Subsidence | £1,000 – £1,500 | Standard across many providers |
| Escape of Water | £400 – £800 | Mandatory specialist excess |
| Storm Damage | £250 – £500 | Can vary significantly based on location and insurer |
| Flood Damage | £250 – £1,000 | Properties previously flooded may face higher premiums and excesses |
How to Find Your Ideal Excess Level
Assess Your Financial Resilience
The most crucial step is to honestly evaluate your savings and emergency fund. How much could you comfortably afford to pay out of pocket if you had to make a claim tomorrow? If you have a robust emergency fund, you might be able to handle a higher voluntary excess, leading to lower premiums. For example, increasing your voluntary excess to £1,000 could offer significant savings, but only if you have that £1,000 readily available.
Compare Premiums at Different Excess Levels
When you’re shopping for insurance, don’t just accept the default excess. Actively compare quotes for the same level of cover but with varying voluntary excess amounts. You might find that increasing your voluntary excess by £100 or £200 results in a noticeable reduction in your annual premium. For instance, increasing voluntary excess to £500 can save you £26 for buildings insurance.
Consider the Risk Profile of Your Property
Your property’s location and construction can influence the types of claims you’re more likely to make. If you live in a flood-prone area, you’ll want to pay close attention to the excess for flood damage. If your home is older and in an area with potential subsidence issues, the high compulsory excess for such claims becomes a significant factor. Properties that have been flooded in the past are £29.75 more expensive on average to insure, and this often comes with higher excesses.
Bundle Your Insurance
It’s generally cheaper to bundle your buildings and contents insurance together rather than taking out separate policies. This can sometimes lead to better overall pricing, and you may find more flexibility in setting your excesses across both types of cover. Building and contents insurance together account for 75% of policy types sold, indicating its popularity and potential for savings.
What I’d do is use a comparison site and adjust the voluntary excess slider to see the immediate impact on the premium. I’d then check the specialist excesses for risks relevant to my area, like flood or subsidence, and ensure I could afford those if needed. If I was concerned about minor leaks, I might consider a Wi-Fi water leak detector to prevent small issues from becoming costly claims that might exceed my excess.
- 1Evaluate Your SavingsDetermine how much you can realistically afford to pay towards a claim without financial hardship.
- 2Compare QuotesGet quotes with different voluntary excess levels to see the premium savings.
- 3Check Specialist ExcessesUnderstand the higher excesses that may apply for specific risks like subsidence or escape of water.
- 4Consider Claim FrequencyThink about whether you’d claim for small damages that fall below your total excess.
Frequently Asked Questions About Insurance Excess
Can I change my excess after taking out a policy? ▾
What is the difference between compulsory and voluntary excess? ▾
How much can I save by increasing my voluntary excess? ▾
Is it always best to have a low excess? ▾
What happens if my claim is less than my excess? ▾
Choosing the right property insurance excess is a critical step in protecting your home and your finances. By understanding the interplay between compulsory and voluntary excesses, assessing your personal financial resilience, and comparing quotes carefully, you can find a policy that offers appropriate cover without an unnecessarily high premium or an unaffordable potential payout.
If this was useful, you might also want to read 7 Secrets to Negotiating a Better Deal on Your UK Property Insurance Renewal.
Sources and Further Reading
Top Tips for Protecting Your UK Property Insurance — This article provides broader advice on ensuring your home insurance is adequate and offers the best protection.
Property Insurance Horror Stories: UK Homeowners Share Their Nightmares — Reading about others’ experiences can highlight the importance of understanding policy details like excesses.
What is Buildings Insurance Excess UK?. Utterly Covered, 2026.
Home Insurance Statistics. MoneySuperMarket, Accessed 2026.
