Table of Contents
Excess in Motor Insurance Explained
Top 3 Considerations for Motor Insurance Excess
Frequently Asked Questions About Motor Insurance Excess
Secure your Policy with Acorn’s Specialist Insurance
What is excess in motor insurance, and why does it matter? This fundamental aspect of motor insurance plays a crucial role in controlling costs for both the insurance company and the consumer.
Did you know in the latest figures released by the ABI, motor insurers paid out a staggering £1.9 billion in Quarter 4 of 2024, taking the yearly total to £7.7bn. This figure highlights the growing challenges within the motor insurance industry and the associated escalating costs. The concept of excess in insurance is a key factor when it comes to managing the increasing costs of insurance claims; indeed, every policyholder should understand the importance of motor insurance excess and how this can affect them.
But how much would you be expected to pay out-of-pocket in the event of an accident or claim? What is the difference between compulsory and voluntary excess? Understanding these details can significantly impact you decision-making and financial planning. That’s why we’ve put together this user’s guide to excess in motor insurance. Our aim is to demystify the concept of ‘excess’, clarify its importance, and provide you with the information you need to make informed choices about your motor insurance policy.
What is Car Insurance Excess?
Car insurance excess is the amount you agree to pay towards the cost of a claim before your insurer covers the rest. There are two types of excess: compulsory and voluntary.
What is compulsory excess?
Compulsory excess is set by the insurer and cannot be changed. This can vary and is usually based on several factors, which can include, for example:
- Driving history: Experienced drivers with a clean driving record might benefit from a lower compulsory excess.
- Make and model: Newer or more expensive cars can have higher compulsory excess due to the higher cost of vehicle damages or replacement parts.
For younger drivers or those with high-performance cars, the compulsory excess might be higher due to increased risk. Insurers often impose additional compulsory excesses for drivers under the age of 25, as they are also considered higher risk.
What is voluntary excess?
Voluntary excess is an additional amount you choose to pay on top of the compulsory excess. Opting for a higher voluntary excess can potentially lower your insurance premiums, but remember, it also means you’ll pay more personally if you need to make a claim.
Excess in Motor Insurance Explained
In the event of a claim, your total excess — comprising of both compulsory and voluntary amounts — will determine your share of the claim costs. For example, if you have a compulsory excess of £200, and you set your voluntary access at £150, you will pay £350 in total if you need to make a claim.
Understanding your car insurance excesses for your policy is crucial. It not only affects the amount you will need to pay during a claim but can also impact the cost of your insurance premium.
Choosing the right policy
When selecting a car insurance policy, consider how much excess you can afford to pay in the event of a claim.
Practical examples:
To illustrate how excess in motor insurance works, let’s consider a few scenarios:
- Scenario 1: Low Voluntary Excess
- Compulsory Excess: £300
- Voluntary Excess: £100
- Total Excess: £400
If you have an accident and the vehicle damage costs are £1,000, you will pay £400, and your insurer will cover the remaining £600. Your premiums might be higher because the insurer is taking on more risk.
- Scenario 2: High Voluntary Excess
- Compulsory Excess: £300
- Voluntary Excess: £500
- Total Excess: £800
In this case, if the vehicle damage costs are £1,000, you will pay £800, and your insurer will cover the remaining £200. Your premiums might be lower because you are taking on more risk.
The Benefits of Understanding Motor Insurance Excess
Understanding exactly what motor insurance excess is could help you make more informed decisions about your policy. Here are some benefits:
- Cost Management: By balancing your voluntary and compulsory excess, you can manage your insurance costs more effectively.
- Financial Preparedness: Knowing your total excess helps you prepare financially for potential claims.
Tips for Managing Car Insurance Excess
Here are some tips to help you manage your car insurance excess:
- Assess Your Financial Situation: Choose a voluntary excess that, when added to your compulsory excess, you can afford to pay in the event of a claim.
- Review Continually: Remember to review your personal finances and car insurance policy periodically to ensure it still meets your needs, and adjust your excess if necessary.
Top 3 Considerations for Motor Insurance Excess
1. Affordability
- Assess Your Financial Situation: Before choosing your voluntary excess, consider how much you can afford to pay in the event of a claim. While a higher voluntary excess can potentially lower your premiums, it also means you’ll pay more if you make a claim.
2. Impact on Premiums
- Balancing Costs: Increasing your voluntary excess can potentially reduce your insurance premiums, making your policy more affordable. However, it’s essential to find a balance that ensures you can still afford the excess if needed.
3. Policy Terms and Conditions
- Understanding Your Policy: Carefully review the terms and conditions of your insurance policy to understand how excess is applied. Some policies may have additional compulsory excesses for specific situations, such as claims involving young drivers or high-risk areas.
Frequently Asked Questions About Motor Insurance Excess
How do I know how much my motor insurance excess is?
Your motor insurance excess is detailed in your policy documents. It includes both the compulsory and voluntary excess amounts. If you’re unsure, you can always contact your insurer directly to confirm the total excess applicable to your policy.
What is the difference between compulsory and voluntary excess?
Compulsory excess is a fixed amount set by your insurer that you must pay in the event of a claim. It cannot be changed. Voluntary excess, on the other hand, is an additional amount you choose to pay on top of the compulsory excess.
How does my excess affect my insurance premiums?
The amount of voluntary excess you choose can influence the price of your insurance policy. A higher voluntary excess can result in lower premiums because you agree to cover more of the cost in the event of a claim. On the other hand, a lower voluntary excess means higher premiums but less out-of-pocket expense if you need to make a claim.
What happens if I can’t afford to pay my excess in the event of a claim?
If you can’t pay your excess, your insurer won’t process your claim until you do. Therefore, it’s crucial to select a voluntary excess you can easily afford as well as the compulsory excess in case of an accident.
Secure your Policy with Acorn’s Specialist Insurance
With over 40 years of experience, Acorn Insurance provides motor insurance dedicated to your needs. Understanding car insurance excess is essential for managing your policy costs and ensuring you have the right coverage.
By balancing your voluntary and compulsory excess, you can find a policy that offers both financial protection and peace of mind.
Ready to take control of your motor insurance excess? Visit our car insurance, taxi insurance, or van insurance pages, or give us a call for an instant quote. Let’s discuss how we can aim to meet your insurance needs today!
Why choose Acorn?
Acorn, a UK-based specialist insurance broker, offers a range of insurance products for individuals and businesses. Our benefits include:
- Experienced: With over 40 years’ experience, our team knows the ins and outs of motor insurance.
- Customer-Friendly Support: Our customers rate us highly with 4.5 stars on Trustpilot (April 2025) Request a quote from our specialist team today!
- Specialist Coverage: We’ll ensure you get the level of coverage you need. We may even be able to help you if you have points or convictions on your licence.
Further reading…
Car Depreciation: Understanding its Impact on Your Insurance Policy →
Reducing Insurance Costs with Penalty Points on Your Licence →