A cracked windscreen, a reversed bumper or a burst pipe can produce the same unwelcome question: what is the insurance excess, and will claiming actually leave you any better off? It is rarely the most exciting line in a policy schedule, which is precisely why it has a talent for causing surprise when the kettle has leaked through the ceiling.
Excess is not a trick, nor is it a bill dreamt up by a claims handler on a rainy Tuesday. It is the part of an insured loss that the policyholder agrees to bear. Yet the detail matters. Different covers can carry different excesses, voluntary choices can alter the premium, and a perfectly genuine claim may still be too modest to make financial sense.
What insurance excess actually means
Put simply, insurance excess is your agreed contribution towards a claim. If an insurer accepts a home claim worth £2,000 and the applicable excess is £250, the insurer pays £1,750. You bear the first £250.
Usually, this is not money you post to the insurer in advance. Where a repairer, garage or contractor is involved, they may collect the excess from you while the insurer settles the remaining balance. In other cases, the insurer deducts it from the cash settlement. The route varies, but the arithmetic tends to be rather stubborn.
An excess helps insurers avoid processing a mountain of very small claims, and it gives policyholders a reason to take reasonable care. Without one, a chipped worktop, a scuffed alloy and a missing garden chair might each become a claims event. The administration alone would make premiums considerably less cheerful.
It also means that insurance is principally there for losses that would genuinely hurt, rather than every domestic irritation. That is not always comforting when the irritation happens to be your own car door meeting a concrete bollard, but it is the commercial logic behind the arrangement.
Compulsory and voluntary excess: two amounts, one surprise
The figure people remember is often only half the story. A policy may contain both a compulsory excess and a voluntary excess.
The compulsory excess is set by the insurer. It may reflect the type of cover, the property, the vehicle, the driver, the claims history or the perceived risk. A young motorist, for example, may find a larger compulsory excess attached to an accidental damage claim than an older driver with a long claims-free record. Some home policies apply a higher compulsory excess for escape of water or subsidence than for other incidents.
The voluntary excess is the amount you chose when taking out or renewing the policy. Selecting a higher voluntary excess can reduce the premium. That can be sensible if you have savings available and are comfortable meeting the amount after a loss. It is less sensible if the lower premium is all that was noticed and the total excess was left lurking in the small print.
If your compulsory excess is £300 and your voluntary excess is £200, your total excess is normally £500. A £450 claim would therefore produce no insurer payment at all. A £1,500 claim could result in £1,000 being paid, subject to the policy terms and the claim being accepted.
The cheaper premium is not automatically a bargain. It is a trade-off. You are agreeing to carry more of the risk yourself in return for paying less each year. For a careful driver with a healthy contingency fund, that may work well. For a household already counting every pound, it may be a false economy.
Why the excess changes from claim to claim
There is no universal excess because there is no universal risk. The excess for a stolen bicycle may differ from the excess for a damaged laptop. Motor policies can apply separate figures for windscreen claims, accidental damage, theft and fire. Travel insurance may have an excess per person, per section, or per incident. A commercial policy can be more intricate still, particularly where water damage, theft, machinery breakdown or liability are concerned.
Then there are specialist circumstances. Flood cover, subsidence, high-value items, unoccupied homes and young drivers can all bring their own terms. The schedule and policy wording matter more than a vague recollection of what the comparison site displayed eleven months ago.
A loss adjuster learns early that the most difficult conversations do not usually begin with a complicated calculation. They begin with, “Nobody told me.” Often, the information was provided, but it was buried among renewal papers, endorsements and the understandable human desire to get on with life.
Before buying or renewing, check four practical points:
- the compulsory and voluntary excess, added together;
- whether different sections of cover have different excesses;
- whether the excess applies to each claim or each item affected; and
- whether any endorsements alter the standard amount.
That five-minute inspection is considerably preferable to discovering a £1,000 excess while standing in a wet kitchen with a plumber charging by the hour.
Should you make a claim if the loss is close to the excess?
Not every loss should become an insurance claim. If the cost of repair is only a little more than the excess, it may be worth obtaining an estimate and doing the sums before proceeding. A £700 repair against a £500 excess may leave only £200 payable by the insurer. Depending on the policy, a claim could also affect a no-claims discount or future premium.
That does not mean policyholders should keep quiet about every incident. Motor policies, for example, commonly require an insurer to be told about accidents or circumstances that may give rise to a claim, even where you do not intend to claim for your own damage. If another party later alleges injury or damage, silence can become an expensive strategy.
The sensible approach is to distinguish between notifying an incident and pursuing payment. Read the policy, report what you are required to report, and ask how a notification will be recorded. Do not invent a version of events designed to make the figures look better. Claims handlers have heard every creative explanation for a damaged wing mirror, and very few improve with repetition.
When you may get the excess back
If someone else is responsible for your loss, your insurer may try to recover its outlay from that party or their insurer. This is known as recovery. Where the recovery succeeds, your excess may be refunded, either by your insurer or through the responsible party’s insurer.
The key word is “may”. Fault can be disputed, liability can be shared, and the other party may be uninsured or impossible to trace. A refund is not usually immediate, because the insurer must first establish the facts and recover the money. In a non-fault motor accident, a protected no-claims discount may preserve the discount itself, but it does not necessarily remove the excess at the outset.
Legal expenses cover, uninsured loss recovery services and policy-specific arrangements can affect the process. Again, this is one of those occasions where the policy wording earns its keep.
Excess is not a licence for poor claims decisions
An excess should never tempt anyone to exaggerate a loss in an attempt to “make it worthwhile”. A claim is a statement of fact, supported where possible by photographs, receipts, reports and sensible evidence. Adding an imaginary television to a genuine burglary, or turning old wear and tear into sudden damage, is not clever accounting. It is fraud.
Equally, insurers should not hide behind excess jargon to brush off a valid claim. A good claims process explains the applicable excess, shows how it has been calculated and deals fairly with the evidence. Most disputes are easier to resolve when both sides are clear about the cover purchased and the event that occurred.
For readers who enjoy the human theatre behind the paperwork, this is where insurance becomes far more interesting than its reputation suggests. The figures are straightforward; the circumstances rarely are. Richard Thurstan’s The Perils of a Loss Adjuster was born from precisely that territory, where an apparently ordinary claim can acquire unexpected characters, improbable explanations and rather more drama than the policy booklet promised.
A small check that can save a large argument
The best time to understand your excess is before the mishap, not while a recovery vehicle is loading your car or a contractor is lifting damp floorboards. Keep the policy schedule with your important documents, know the total amount you would need to find, and revisit it at renewal rather than automatically accepting last year’s choices.
Insurance works best when it is bought with clear eyes: enough cover for the serious misfortune, an excess you can genuinely afford, and no expectation that a modest premium should remove every cost of life going slightly wrong. That is not glamorous advice, but then neither is paying £500 you had not planned for. It is, however, the sort of detail that lets you face a claim with fewer shocks than the incident itself.