What is Car Insurance Excess?

Compulsory vs voluntary car insurance – how it works

You will no doubt have heard the term car insurance excess but have you ever wondered what it actually is and how it can affect your insurance policy? Understanding the meaning of car insurance excess is crucial as it can directly affect the cost of your premium and how much you’ll have to pay in the event of a claim.

Tempcover’s handy guide will answer all your questions about compulsory and voluntary excess.

Car insurance excess explained

Car insurance excess is the amount you agree to pay before your insurance covers the rest of the claim. Here, we’ll break down everything you need to know about this important part of your insurance policy, making it easier for you to understand how both compulsory and voluntary excess works.

What is car insurance excess?

Motor insurance excess is a pretty simple and straightforward idea, at least compared to some other aspects of insurance. Essentially, your excess is a set amount of money that you, as the policyholder, agree to pay towards the total cost of an insurance claim. It is required by all car insurance providers.

The level of excess cover you pay should be clear when you receive your insurance quote but there are a number of additional factors that can increase a premium. For example, someone under 25 might have to pay a higher excess, due to their age and lack of experience.

Other examples of different or additional excess include:

• Driver specific
• High performance vehicles
• Young driver
• Fire and theft
• Non-approved repairs
• Windscreen repairs

Why do we need car insurance excess cover?

Car insurance excess exists to stop people making low-value claims for minimal damage as these costs will soon add up. Excess is designed for the larger claims that many people can’t cover or afford on their own. Excess also helps deter fraud and false claims as people who have paid this and are making a claim are more likely to be genuine.

Compulsory and voluntary excess

There are two types of insurance excess – voluntary excess and compulsory excess – but what is the difference between them? The answer lies in the names.

What is compulsory excess?

Compulsory excess car insurance is a fixed amount fee set by your insurance provider (e.g. if your compulsory excess is £250, you’ll need to pay this amount towards any claim you make). The price of this is dependent on factors including the make and model of your car, where it’s stored and the driver’s age and experience.

What is voluntary excess?

Voluntary excess car insurance is a fee set by you, the policymaker, based on how much you can afford to pay towards the cost of any claims you make if you have an accident. You will pay this amount on top of your compulsory excess. If you choose a voluntary excess of £100 and your compulsory excess is £250, you will pay a total of £350 towards a claim.

What is total excess?

Total excess is the combined amount of compulsory and voluntary excess you will need to pay towards any claim made.

How much voluntary excess should I pay on car insurance?

Voluntary excess in car insurance is a rate set by you as the policymaker. It’s the amount you’re willing to pay towards the cost of any claim you make if you have had an accident.

This amount is up to you and is decided when you buy or renew your car insurance, but you have to ensure it suits your needs and that you can afford it. Many people stick with a voluntary excess of £0 but raising your voluntary excess can lead to cheaper quotes and reduce the overall cost of your car insurance premium.

To calculate your total excess amount, you simply add your compulsory excess to your voluntary excess. If, for example, you have a compulsory excess amount of £500 and you choose to set your voluntary excess at £250, you will have to pay £750 towards the total cost of the claim.

What are potential issues with paying a higher voluntary excess?

As we mentioned above, a larger voluntary excess usually means a reduced overall premium. Many drivers who think they’re unlikely to have an accident, and therefore make a claim, will take the risk and massively increase their voluntary excess to cut the cost of their premium.

You can realistically save hundreds of pounds on your car insurance premium, however, remember that accidents can happen to anyone and you will still have to pay the full excess amount.

If you have increased your excess to £1,000 to save some money, you need to make sure at some point you have that money in the event of an accident. If you don’t have the money when you come to make a claim, the insurer can deduct the amount owed from what they’re willing to pay or refuse your claim entirely.

You should always ensure you have enough money to pay for the excess before purchasing the policy. Once again, if you can’t afford to pay the excess your insurance provider may refuse to pay out.

Do I still pay if the accident wasn’t my fault?

Yes, you may still need to pay both your compulsory and voluntary excess towards the cost of the repairs. That being said, you can claim back the cost of your excess from the insurance provider of the driver at fault.

Usually, if your insurance company is dealing with the claim, they will be able to get the money back for you from the other insurer – this process is normally covered under your legal expenses cover.

If, however, the at-fault driver is driving without insurance or you have been a victim of a hit and run, you may need to reclaim the funds through the Motor Insurance Bureau. The MIB works alongside the police and enforcement agencies including the Driver and Vehicle Licensing Agency (DVLA) to tackle uninsured driving and remove uninsured vehicles from UK roads.

If your car is written off as the result of an accident, the excess may be taken off the settlement fee (the market value of the car at the time of the accident).

What is the excess on temporary insurance?

Temporary car insurance comes with a compulsory excess set by each of the insurers. This can differ depending on you, the vehicle and the insurer. Your excess will be highlighted during your purchase journey.

Understanding how car insurance excess works will help ensure you’re adequately covered in the event of an accident. It’s a good idea to carefully consider both compulsory and voluntary excess when choosing your policy.

For more information on UK car insurance regulations, visit the UK Government’s website.

Tempcover offers an excess reduction add-on

Tempcover’s Excess Reduction policy is an additional extra. It enables you to recover most of the cost of the amount you have paid as Excess in the event you need to make a claim and the incident was your fault, partly your fault or if the third party cannot be contacted.

You will receive a proportion of the full excess amount back if you have purchased the excess reduction cover when purchasing your temporary insurance policy. The amount you will be reimbursed will be stated on your Excess Reduction Policy Schedule.