When you are comparing car insurance quotes from different insurance providers, one of your key considerations will obviously be the cost of the policy itself.
But there’s another consideration that also has the potential to impact your wallet, both in the short term and in the longer term – the insurance excess.
What is the insurance excess?
The insurance excess is the amount stated on a policy that you will be obliged to cover yourself if you ever have to make a claim.
For example, if your total car insurance excess is £400 and you make a claim for £2,500, you will be expected to cover £400 out of your own pocket. Essentially, you will only receive £2,100 from your insurance provider.
As always, it’s vital to check the specific terms and conditions of your own policy, as there could be important points in there relating to your excess.
For instance, car insurance policies might sometimes include a separate windscreen excess, which would be the amount you’d be agreeing to cover yourself if your windscreen had to be replaced.
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What’s the difference between the compulsory excess and the voluntary excess?
Your total insurance excess will be the total of two separate excess amounts, the compulsory excess and the voluntary excess.
As the name suggests, the compulsory excess is a set amount that is applied to your policy by the insurance provider. It’s a mandatory amount you will have to pay should you ever need to make a claim, and you are unable to alter or opt out of this particular part of the total excess amount when you’re agreeing to the policy.
The voluntary excess, on the other hand, is the portion of your total insurance excess that is entirely optional – you could choose to set it at zero in order to ensure you receive a larger payout should you ever have to claim, or you could decide to agree to a relatively high voluntary excess in order to try to reduce your premium.
So does agreeing to a higher voluntary excess always result in a lower premium?
Insurance providers use a wide range of variables when they’re calculating their premiums, and they also give each of those variables a slightly different weighting, but most providers will offer a modest reduction in the premium amount if the policyholder agrees to increase the total insurance excess by agreeing to a voluntary excess.
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However, when you’re comparing car insurance policies it’s important to bear two caveats in mind:
1. As already mentioned, the excess is just one of the variables insurance providers will use when they’re calculating their premiums, and as such the effect of agreeing to a voluntary excess really is likely to be rather modest – don’t expect a big drop in the premium when you hike your excess.
2. Don’t assume the premium will continue to fall as you push your voluntary excess up, because there may well be a cut-off point where the effect of changing the excess because negligible. So while agreeing to a £250 voluntary excess might result in a modest reduction in the premium compared to an excess of zero, pushing that excess to £500 could end up costing you more if and when you claim without reducing your premium any further.