When you insure your home, you’ll see two figures related to claims: the compulsory excess and the voluntary excess. While the compulsory excess is set by your insurer, the voluntary excess is an amount you choose. This choice can significantly impact your premium, but it also means you’re agreeing to pay more out of pocket if something goes wrong. Understanding this balance is key to getting the right home insurance for your needs. Here’s what you actually need to know.
Understanding Your Home Insurance Excess
When you take out a home insurance policy, you’ll encounter the term ‘excess’. This is the amount you pay towards any claim you make. It’s usually split into two parts: the compulsory excess, which your insurer sets, and the voluntary excess, which you choose. By agreeing to a higher voluntary excess, you’re essentially telling your insurer you’re willing to cover a larger portion of any initial damage yourself. In return for taking on more of the financial risk, the insurer will reduce your annual premium.
For example, Aviva often has a compulsory excess of around £250 for general claims. However, for specific issues like subsidence, their excess jumps significantly to £1,000. Other providers like Direct Line might offer lower compulsory excesses, sometimes as low as £150. LV= tends to have a general excess around £300, but they are known for strong cover on alternative accommodation. Admiral, on the other hand, might start their compulsory excesses even lower, sometimes at £100.
What I tend to notice is that many people focus solely on the premium cost without fully grasping the implications of their chosen excess. It’s a trade-off between immediate savings and your ability to pay if you need to claim.
The Real Cost of Claims: Why Excess Matters
The excess on your home insurance policy is more than just a number; it directly affects how much you’ll receive if you need to make a claim. If you have a total excess of, say, £500 – made up of a £200 compulsory excess and a £300 voluntary excess – any damage costing less than that amount is effectively not covered by your insurance. For instance, if you have a claim for £600 worth of damage, your insurer will only pay out £100, as you are responsible for the first £500.
This is particularly relevant when considering specialist claims. For subsidence, the excess is commonly £1,000, and can even be £1,500 with some providers. The average cost of a severe subsidence claim can reach up to £75,000, so while the excess is high, the insurer still covers the vast majority of the cost. Similarly, escape of water claims, which account for 29.42% of all claims, often have a mandatory specialist excess ranging from £400 to £800. These figures highlight why it’s crucial to have enough savings to cover your excess, especially for these more severe or frequent issues.
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. Understanding your excess is a significant part of ensuring you’re getting that fair value, as it directly influences both your premium and your potential out-of-pocket expenses.
What I’d do is calculate the total excess I’d be comfortable paying if I had to make a claim for subsidence or escape of water. Then, I’d see how much that would reduce my annual premium and weigh it against my savings. If I had a substantial emergency fund, I might opt for a higher voluntary excess to save on premiums.
Common Pitfalls When Setting Your Voluntary Excess
Many people make the mistake of choosing a voluntary excess based purely on getting the cheapest possible premium. While saving money is important, this approach can leave you exposed if you need to make a claim. For instance, setting your voluntary excess too high might mean you can’t afford to pay it if an unexpected event occurs. This is especially true for claims like escape of water, which are quite common, accounting for 29.42% of all claims. If your total excess is higher than the cost of the repair, you’ll end up paying for it yourself.
Another common error is not differentiating between general claims and specialist ones. Insurers often have higher compulsory excesses for issues like subsidence or flood damage. If you assume your voluntary excess will apply equally to all claim types, you might be in for a shock. For example, while a general claim might have a total excess of £400, a subsidence claim could easily have a total excess of £1,200 or more, depending on the insurer’s policy. This means you need to be prepared for a much larger out-of-pocket expense for certain events.
A further misstep is failing to review your excess when your circumstances change. Perhaps you’ve recently had some home improvements done, or your financial situation has improved, meaning you can now afford a higher excess. Or, conversely, you might be facing tighter finances and need to reduce your excess to make potential claims more manageable, even if it means a slightly higher premium. Not reassessing this can lead to a mismatch between your insurance cover and your current needs.
What I’d do is review my savings account. If I had a healthy emergency fund, I might consider increasing my voluntary excess to save on the annual premium. However, if my savings were tight, I’d opt for a lower voluntary excess, even if it meant paying a bit more each year, to ensure I could afford to pay it if I needed to claim.
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| Property Type | Average Annual Cost |
|---|---|
| Detached Houses | £297.89 |
| End of Terrace Houses | £228.69 |
| Semi-Detached Houses | £230.71 |
| Terraced Houses | £222.21 |
| Terraced Town Houses | £241.86 |
| End of Terrace Town Houses | £228.24 |
| Flats/Apartments – Converted | £286.84 |
| Flats/Apartments – Purpose Built | £226.05 |
| Maisonettes – Converted | £279.20 |
| Maisonettes – Purpose Built | £233.54 |
| Detached Bungalows | £255.00 |
| Semi-Detached Bungalows | £196.12 |
Making Informed Choices About Your Excess
Choosing the right voluntary excess involves a careful assessment of your financial situation and your risk tolerance. The primary benefit of increasing your voluntary excess is a reduction in your annual premium. For instance, opting for a £300 voluntary excess could save you around £25 each year on your policy. While this might seem small, it adds up over time, and for some, this saving is worth the increased risk in the event of a claim.
However, it’s crucial to ensure you can comfortably afford to pay your chosen excess. If you have a substantial emergency fund, you might be able to take on a higher excess. For example, if you have £1,000 or more readily available, you could comfortably set a voluntary excess of £500 or even £700, knowing you can meet the cost if needed. This is where a financial advisor could help you assess your capacity for risk.
When considering your excess, think about the types of claims that are most likely for your property. If you live in an area prone to flooding, you might want to ensure your flood excess is manageable, especially since properties that have flooded previously can face premiums that are £29.75 more expensive on average. Conversely, if your home is well-maintained and not in a high-risk area for common issues like escape of water, you might feel more comfortable with a higher voluntary excess for those types of claims.
What I’d do is get a few quotes with different voluntary excess levels. I’d then compare the total annual cost and the potential out-of-pocket expense for a claim. If the savings from a higher excess are significant and I have the funds to cover it, I’d consider that option. If not, I’d stick with a lower excess to ensure peace of mind.
Frequently Asked Questions About Voluntary Excess
What is the difference between compulsory and voluntary excess? ▾
Can I change my voluntary excess after taking out a policy? ▾
How much can increasing my voluntary excess save me? ▾
What happens if my claim is less than my total excess? ▾
Understanding your voluntary excess is a crucial step in managing your home insurance costs and ensuring you’re adequately prepared for potential claims. By carefully considering your financial situation and risk tolerance, you can make an informed decision that balances premium savings with your ability to cover out-of-pocket expenses.
If this was useful, you might also want to read Understanding Common Property Insurance Exclusions in the UK.
Sources and Further Reading
Understanding Common Property Insurance Exclusions in the UK — This article explores common exclusions in property insurance policies, which can affect what your policy covers and how your excess applies.
What is Buildings Insurance Excess UK?. Utterly Covered, 2026.
Home Insurance Statistics. MoneySuperMarket, 2026.
