Car Insurance Excess - What is it?

Car insurance excess is the amount of money you will have to pay in the event of a car insurance claim e.g. if your excess is £100, then you will have to pay the initial £100 of any claim. The excess makes up the first part of a claim, so if the claim was for £500, you would pay the first £100 and the insurer the remaining £400.

Compulsory Excess and Voluntary Excess

Some car insurance policies have a compulsory excess which must be paid, whereas a voluntary excess only applies if the driver has chosen to have it added to their policy.

Compulsory excess is most common with young drivers, with many drivers under 21 facing excesses of upto £500. This tends to comes down with age and drivers aged 25+ will often not face any compulsory excess.

Voluntary excess is normally used to help reduce the insurance premium to gain cheaper car insurance. The downfall of this is that in the event of a claim the voluntary excess plus the compulsory excess can work out quite expensive.

Car Insurance Excess Example

Car Value: £1000
Driver Age: 19
Compulsory Excess: £250
Voluntary Excess: £250

If this driver crashed or had their vehicle stolen and it was written off as a total loss, they would be faced with a total excess of £500. As a result their insurance company would only have to pay out £500. In this example the driver would effectivley end up with nothing. The £500 payed out by the insurance company would be cancelled out by the £500 they have to pay the insurance company. As a result they end up with no money and no car.

It is always worth calculating what would happen in the event of a claim and whether it is worth having a high voluntary excess on a low valued car. Take a look at how you can use car insurance excess to get cheaper car insurance.