How does car insurance excess work?

What is car insurance excess?

Generally, you only need to pay the excess if you are to blame for any damage caused and your insurer is paying for the repairs.

Your excess is made up of two parts:

• Compulsory excess: this is the amount set by the insurance company that you must pay in the event of a claim. It is based on the type of vehicle you drive, as well as your age and experience

• Voluntary excess: this is an optional amount you can add on top of the compulsory excess to reduce the price of your car insurance premium

These two amounts are often combined into one excess amount when you get a quote, but not always, so check the policy carefully.

What is a windscreen excess?

You may find your insurer charges a different, smaller excess if you claim for a damaged windscreen – although if it can be repaired rather than replaced, the excess may be waived.

How much excess do you need to pay?

Your total excess can be calculated by adding the compulsory and voluntary amounts together.

For example: If your policy has a compulsory excess of £150 and you add a voluntary excess of £250, you will need to pay £400 if you claim. If you were making a claim for £1,000, your insurance provider would pay the remaining £600 (£1,000 - £400).

You may have to pay the excess immediately to start a claim or the excess may be deducted from the repair bill at the end of the claims process.

• Already insured? You can find out how much your excess is by checking your policy documents or by contacting your insurer to find out.

• Looking for cover? If you are applying for a new policy make sure you check the compulsory excess before you decide whether to add a voluntary amount to your cover.

Do younger drivers get charged a higher excess? 

Many insurers charge a higher compulsory excess if you are a young driver because young drivers are seen as more likely to be involved in an accident. Insurers offset part of the risk by increasing the amount you would need to pay if you made a claim.

For example, an insurer might charge:

• £400 for drivers under 21 years old

• £250 for drivers between 21 and 25 years old

• £150 for all other drivers

Remember, this is the compulsory excess amount, so adding a voluntary amount would make it even higher.

If you drive a luxury or high-performance car, you may also have to pay a higher compulsory excess as the high value of the vehicle means insurers see it as a higher risk.

Is it worth increasing your voluntary excess?

Choosing to increase your voluntary excess can be an easy way to reduce the amount you pay for your car insurance premiums, so if you want to get cheaper insurance it’s an option worth considering. 

However, it’s crucial to ensure you would be able to afford to pay both the voluntary and the compulsory excess if you had to make a claim. If your compulsory excess is high, you might want to keep your voluntary excess relatively low.

You should also carry out some comparisons to check whether a higher voluntary excess will result in you paying more overall if you have to make a claim.

For example, the table below shows annual comprehensive policy quotes for an 18-year-old living in Maidstone driving a 2013 Ford Fiesta Zetec with no years' no claims bonus*:

*Quote from Admiral, October 2020.

In this example the driver could save £239.67 on an annual policy if they chose to add a £1,000 voluntary excess compared to not adding any.

However, in the event of a claim the driver would need to pay £1,000 plus the compulsory excess, so would be £760.32 worse off overall than if they had chosen a voluntary excess of £0 (£1,773.92 - £1,013.60 = £760.32).

Are there any other drawbacks to increasing your excess?

Your insurer won’t usually pay out for a claim that costs less than your excess, so this can be another reason not to push your voluntary excess too high. 

You might also decide that if you have an excess of £400 and you are making a claim for £500, for example, it’s better to simply pay the full £500 yourself, rather than risk damaging any no claims bonus you’ve built up. 

Remember though – you’ll still need to inform your insurer if you’ve been involved in an accident, even if you don’t make a claim. 

What if you cannot afford the excess?

If you do not have the money available to pay the excess your insurer may refuse your claim or it might deduct the amount from what it pays towards the repairs.

For example, if you make a claim for damages worth £2,000 but cannot afford to pay the £250 excess, your insurer will only pay the remaining £1,750. You would need to arrange to pay the outstanding amount with the garage.

Check the policy to find out where you will stand.

What is excess insurance? 

Excess insurance sits alongside your car insurance and will cover the cost of your excess if you have to make a claim. You would still need to pay the excess initially in the event of a claim, but you can then get it back from your excess insurance policy.

To work out if an excess insurance policy is worthwhile, consider how much the cover will cost versus the savings you will see for increasing your voluntary excess.

For example, if you bought an excess insurance policy for £50 to cover an excess amount of £1,000, it would only be worth the money if the £1,000 excess saved you more than £50 on the cost of the policy.

Keep in mind that excess insurance only pays out if your car insurance pays out for a claim, which means the claim has to be worth more than the excess. If you had an excess of £1,000 but the claim was only £700, neither your car insurance policy nor your excess insurance policy would pay out.