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How Car Insurance Excess Works and What It Means for You
As a vehicle owner and driver, car insurance is essential, but understanding how it really works, especially when it’s time to make a claim, can be confusing. One of the most misunderstood terms in your policy is the excess. If you are looking for the best value for your in money when it comes to your motor vehicle insurance policy, knowing what excess means could save you both money and frustration.
Let’s break it down.
What Is Car Insurance Excess?
Excess is the amount you agree to pay out of pocket when making an insurance claim. It’s your share of the cost before your insurance provider steps in to cover the rest.
Example:
If your policy has an excess of $50,000, and you have an accident that causes $200,000 in damage, you’ll pay the first $50,000 and GenAc covers the remaining $150,000.
Why Does Excess Matter?
Excess helps insurers reduce the number of small, avoidable claims and keeps premiums more affordable for everyone. For you, it means sharing a bit of the risk, so you’ll want to understand how much you’re responsible for if something goes wrong.
Types of Car Insurance Excess
1. Voluntary Excess
This is an extra amount you choose to pay in addition to the compulsory excess. Increasing your voluntary excess usually lowers your premium, but it means you’ll pay more if you need to claim.
2. Compulsory (Standard) Excess
This is the set amount required by your insurer, based on your car, risk profile, and policy type. It’s non-negotiable.
3. Additional Excesses
In some cases, extra excesses may apply. These include:
- Young or inexperienced drivers (often under age 25)
- High-performance vehicles
- Drivers with prior claims or convictions
These are assessed based on risk and may be applied on top of your standard or voluntary excess.
How Excess Affects Your Premium
There’s a direct relationship between excess and premium:
- Higher excess = Lower premium
- Lower excess = Higher premium
Why? Because when you agree to pay more in the event of a claim, the insurer takes on less risk.
Example:
- Policy A: $20,000 excess → Premium: $90,000
- Policy B: $60,000 excess → Premium: $72,000
Choosing a higher voluntary excess might help you save on your premium, but only if you can afford that out-of-pocket cost later.
How Excess Works When Making a Claim
If your car is damaged and you’re making a claim:
- You’ll pay the excess amount first
- GenAc covers the rest of the approved costs
Example Scenarios:
- Claim total: $150,000
- Excess: $50,000
- You pay: $50,000
- GenAc pays: $100,000
In some cases (e.g., very minor accidents), the damage might be less than your excess, which leads to our next point.
When You Don’t Have to Pay an Excess
You may not have to pay an excess if:
- You weren’t at fault and the third party accepts full liability
- Your policy includes a waiver under special conditions (e.g., long-term no-claim bonus)
- The damage costs less than the excess (in which case, it might not be worth claiming at all)
Always check your specific policy or talk to a GenAc rep to confirm.
How to Choose the Right Excess
Consider your financial situation and risk tolerance.
- Can you afford a higher out-of-pocket cost in an emergency?
- Do you drive in high-risk areas or commute daily in heavy traffic?
- Are you looking to lower your premium now?
Tips:
- Add as much voluntary excess as you can afford if you want to balance affordability and protection.
Always confirm the total excess (compulsory + voluntary + any additional) before finalising your policy.
Frequently Asked Questions
Q: Can I claim if the damage is less than my excess?
A: Technically yes, but it’s not worth it, your insurer won’t pay out, and it could still affect your claims history.
Q: Can I get my excess refunded?
A: Only in specific cases, like if you’re proven not at fault and the other party is fully liable. In such cases, GenAc may recover the excess on your behalf.
Understanding how car insurance excess works is more than just fine print, it’s key to making informed decisions about your coverage and your budget. At GenAc, we’re here to help you demystify insurance and choose the right balance between protection and affordability.
Need help choosing the right excess or understanding your policy?
Call us at 1-876-929-8450 or visit www.genac.com.