GuideHQ

What is an insurance excess and how does it work?

Compulsory and voluntary excess, how they stack, and why a high excess can make a policy useless.

Difficulty
beginner
Time
15 min
Read
2 min
Safety
caution

Short answer

The excess is the amount you pay towards any claim. Compulsory and voluntary excesses add together, so a £250 compulsory plus a £500 voluntary means you pay the first £750 of every claim.

Raising the voluntary excess reduces the premium, which makes it an obvious saving until a claim arrives. Understanding how the two parts combine is what stops people discovering the total at the worst moment.

Safety

General information about how excesses work, not advice on what to choose. Policy wording varies and your own document governs your claim — check it rather than relying on a general description.
How an excess works on a claim

Step by step

  1. Understand what an excess is.The amount you contribute to any claim. If the damage is £2,000 and the excess is £500, the insurer pays £1,500. It applies per claim, not per year.
  2. Find both parts.Compulsory excess is set by the insurer and cannot be changed. Voluntary excess is what you chose in exchange for a lower premium. They add together, and people frequently only remember the voluntary one.
  3. Check for different excesses by claim type.Many policies have a higher excess for specific risks — subsidence and escape of water are common. The headline figure may not be the one that applies to your claim.
  4. Work out whether a claim is worth making.If the damage is close to the excess, claiming gains you little and costs your no-claims discount and future premiums. Small claims are frequently not worth making.
  5. Weigh the premium saving against the risk.Raising the voluntary excess by £500 might save a modest amount annually. If a claim is unlikely, that is sensible; if you could not comfortably find the excess, it is not.
  6. Check you could actually pay it.The practical test. An excess you cannot afford makes the policy useless at the moment you need it, whatever it saved on the premium.
  7. Note that the excess applies even when it was not your fault.In many circumstances you pay it up front and it is recovered later if the insurer recovers from a third party. That can take months.
  8. Check it at every renewal.Excesses change between policies and at renewal. It is one of the things comparison sites vary to produce a lower headline price.

Tips

  • Comparison sites often default to a high voluntary excess to show a lower price. Set them all to the same excess before comparing, or you are not comparing like with like.
  • Keep a note of the total excess with your policy documents. It is the number that matters and it is the one people misremember.
  • For contents, check whether the excess applies per item or per incident. It makes a substantial difference to a burglary claim.

Questions people ask

Do compulsory and voluntary excess add together?

Yes. A £250 compulsory plus a £500 voluntary means you pay the first £750 of a claim. People often only remember the voluntary part.

Should I choose a higher excess to lower my premium?

Only if you could comfortably pay it at short notice. An excess you cannot afford makes the policy useless at the point you need it.

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