How Car Insurance Excess Works

If you’ve never made a claim on comprehensive car insurance before, you might be surprised to learn that a part of your claim, called the insurance excess, may have to be paid by you.

Read on for more information about what the insurance excess is, how it works and how you might be able to claim it back if someone else was to blame for the damage to your vehicle.

What is an insurance excess?

The insurance excess is the amount you must pay toward any claim, including costs. The excess applies to all sections of your insurance policy, and it can also be applied to damage or injury claimed by a third party. You, the policyholder, are liable for any claim (by you or any third party) made on your policy up to the value of the excess on the policy.

In the case of claims for repairs to (or loss of) your vehicle, you are responsible for the excess even if the incident is not your fault, although you may be able to reclaim it from a third party (we explain how this works later). The excess will be deducted from any settlement that your insurance company makes for damage to (or loss of) your car.

In the case of third party claims which your insurer settles on your behalf, your insurer may also be able to recover payment from you up to the value of your excess. Pay attention to the terms and conditions in your policy wording so you're clear about your obligations.

Examples:

Your excess is £500 and your claim for car repairs totals £900. Your insurer would pay £400 and you would pay £500.
You were at fault for an accident. There's no damage to your car, but a third party has claimed £1,000 for repairs to their vehicle. Your insurer has settled their claim, but requires you to reimburse them up to the value of your excess.

Why do insurers make you pay an excess?

Car collision There are two very good reasons for asking drivers to pay part of the cost of a claim.

By making drivers accept part of the risk themselves, it can help to influence responsible driving.
When the cost of repairs falls below a policy’s excess threshold, it reduces the number of claims that insurers deal with. This doesn’t just lower the pay-out costs on claims, it reduces administrative costs, too.

The ultimate aim is for safer driving, fewer claims and lower costs, which ultimately helps to drive down the cost of car insurance premiums for everyone.

What's the difference between a compulsory excess and a voluntary excess?

The compulsory insurance excess is part of the terms and conditions of your policy. It's decided at the start or renewal of your policy and it’s not negotiable. It’s based on many risk factors, including your age, driving experience, type of vehicle, postcode, claims or conviction history.

You can sometimes lower your insurance premium by opting to pay a voluntary excess on top of any compulsory excess. You’ll have to weigh up the benefit of a lower premium against the risk of paying a higher amount towards the cost of any future claim.

Is the insurance excess the same for every driver on the policy?

Not necessarily; it can vary from driver to driver. For example, if an experienced driver with a low excess added their inexperienced son or daughter to their policy, the child’s excess might be much higher. The same could be said of a named driver with a poor claim history or motoring convictions.

When do you pay the excess on car insurance?

To keep things straightforward in this scenario, we’ll assume that there are no other parties involved in the claim. If an accident repair centre is fixing your car, your insurance company may pay the repair centre direct, minus the value of your excess, which you’ll have to pay to the repair centre yourself.
If your car was written off, your insurer will deduct the excess from any settlement they agree with you on the market value of the car.
In the case of third party claims, if your insurer has settled a claim for which you are deemed liable, they will write to you with information about the payment they have made. They will ask you to reimburse them up to the value of your excess within a specified time-frame, for example 14 days.

Many claims are far from straightforward, though, involving other drivers, other insurance companies and decisions regarding blame. Read on to find out how you might be able to get the excess refunded if an accident or damage to your vehicle was not your fault.

Do you pay the excess if the claim is not your fault?

You will usually be able to claim back your insurance excess if:

The damage or loss wasn’t your fault and
You know who the responsible third party is and
Both your insurer and the third party’s insurer agree that the third party was to blame

Situations where you might not be at fault but you probably won’t be able to claim back your excess are:

Theft, where the thief is untraceable
Fire damage, where a third party may not be involved
Damage caused by an uninsured driver
Damage caused by an untraceable driver (i.e. “hit-and-run” accidents)
Where fault is disputed by the third party’s insurer and the claim is settled on a 50/50 basis.

What is excess recovery insurance and is it worth buying?

Excess recovery insurance is an extra, optional cover offered by some insurance companies. It refunds all or part of your excess in the event of a claim where there is no third party to claim from.

You can purchase different levels of cover, but the premium is obviously more expensive for higher levels.

The cost of buying this extra cover should be weighed against any savings in the event of a claim, but drivers with a higher excess stand to benefit most.

Young drivers, drivers with claims or convictions, drivers who have had insurance refused or cancelled or who drive high performance cars might fall into this category.

Released On 23rd Dec 2024