The essential guide to car insurance excess

5-minute read

What you’ll learn

• What is excess in car insurance?
• The different types of car insurance excess
• How car insurance excess works
• Find the right balance between excess and premiums

What is car insurance excess?

Car insurance excess is the amount you may need to pay out of pocket when making a claim on your car insurance policy, before your insurer contributes to your claim. Car insurance excess could be a crucial aspect of your vehicle protection strategy that can significantly impact your financial responsibilities in the event of an accident or theft.
 

Understanding excess is important because it can directly influence your premium costs and your potential out-of-pocket expenses. Choosing a higher excess could help lower your premium, making your insurance more affordable, but it also means you'll need to pay more out of your own pocket if you need to make a claim.

Types of car insurance excess

There are several types of excess in car insurance – some are set by the insurer, some can be chosen by you depending on your situation and requirements, and some might only apply under certain situations. Here’s a summary of some common policy excess options you may come across:
 

• Standard excess: The standard or basic excess is the excess set by the insurer. It is applicable to all at-fault claims (unless your policy specifically notes otherwise). 
• Voluntary excess: A voluntary excess is an additional amount that you can choose to pay on top of the standard excess. While opting for a higher voluntary excess can lower your premiums, it also means you need to be prepared to pay more out of pocket at claim time.
• Age excess: An additional excess may be charged if the drivers of your car are under a certain age (usually 25), this is also sometimes known as an under 25 driver excess.
• Inexperienced driver excess: If the driver of your car has not held their full licence for a certain amount of time (typically two years), then an additional excess may apply. 
• Unlisted driver excess: If someone drives your car and causes an accident but they aren’t listed on your policy, you may still be eligible to make a claim. However, depending on the terms of your policy, you may need to pay an additional excess.
• Glass and windscreen excess: If your car windscreen (or window glass) is damaged, depending on the terms of your policy, the repair costs may be covered by your car insurance. Rather than charging the full excess, however, some insurers may offer to waive or reduce the excess you pay. This could be a standard feature of your policy or be offered as an additional cover. In any case, there will likely be conditions and a limit to the amount of claims you can make each year.
• Driver history excess: Some insurers apply an excess if a listed driver has had their licence suspended or restricted in the past (usually three years). This excess may also be applied by some insurers based on previous traffic violations of a listed driver. It would only apply if they were driving the car at the time of the incident.
   

The above excesses can apply individually or in combination, depending on your insurer, the incident you are claiming for and the terms of your policy. Check your policy documents and the product disclosure statement (PDS) for more details about your personal situation.

How does car insurance excess work?

If you are involved in an accident, or your vehicle is damaged or stolen, you may decide to make a claim. If so, you’ll be responsible for paying the car insurance excess amount to the insurer or repairer as set out in your policy or otherwise agreed by your insurer, and your insurer will pay the balance.
 

If the accident was the fault of a person other than the driver of your car, you shouldn’t need to pay an excess as long as you provide the responsible driver’s name and contact details to your insurer to help them to recover costs. This is sometimes referred to as a not at fault excess waiver.
 

You can find out more about the steps to take if you’re involved in an accident.
 

Note, if the cost to repair your vehicle is less than your excess amount, it makes complete sense that you cover the repair cost yourself rather than paying the excess. The voluntary excess amount you choose can be a major deciding factor in whether you choose to file a claim or not.

Excess and premiums: Finding the right balance

Choosing the right excess amount for your situation can be a critical part of managing your car insurance. In fact, there’s a direct relationship between your insurance claim contribution (or excess) and the cost of your premium, which means opting for a higher voluntary excess can help reduce your premiums. 
 

However, it’s important to weigh any potential savings against the higher out-of-pocket cost if you need to make a claim. You’ll find all the details about your current excess, including costs, in your car insurance policy documents. Make sure you familiarise yourself with these so you know where you stand.