If you make a claim on a home insurance policy – whether it’s your buildings or contents cover – your insurer makes a deduction from the total, and does not pay out the full amount. This is known as the policy excess.
So for example, if you have an excess of £100, but make a claim for stolen goods worth £400, your insurer will give you £300. But there are different types of excess.
On both buildings and contents policies, there is typically a compulsory excess and a voluntary excess. The compulsory excess, as the phrase suggests, is applied to every claim. It may typically be around £50, but check the policy before you sign up.
The voluntary excess on your policy is up to you: it can be anything between zero (so you only pay the compulsory excess) and £400 per claim.
But insurers will generally reduce the size of your premiums if you opt for a higher voluntary excess, as this will cut the amount of money they are liable to pay out. Some groups such as students or holiday home owners may choose high excesses as they would only want cover if the worst was to happen, willing to take the risk on replacing theft or loss of low value items.
On certain types of claim, different excesses may apply: for example if you have accidental damage cover as part of your contents policy, the compulsory excess may be higher. On buildings cover, the excess for subsidence claims is likely to be substantially higher – around £1,000 is typical – given the fact such claims are normally for very large sums.
Again, you should check the policy before signing up to make sure you’re happy with the excesses that apply.