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Car insurance compulsory and voluntary excess explained

Everyone knows about car insurance excess. Most people know that you can change it to lower your car insurance premium. 

Person driving their car

But not everyone knows just what car insurance excess is for, and why we have it in the first place. Here we clear things up a little with our guide to this important bit of car insurance jargon

 

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Car insurance excess explained

In a nutshell, your excess is a fixed amount that you have to fork out if you make a claim.

So, if your excess is £250 and you make a claim for £1,000, your car insurance provider might keep the first £250 and only pay you the remaining £750.

If you make a claim that was deemed to be someone else’s fault, your insurer might decide to pay your claim in full and waive your excess.

This isn't set in stone though, so check the T&Cs of your policy to find out if your insurer does this. 

 

What does compulsory excess mean?

Your insurance policy might have a voluntary and compulsory excess.

As the name suggests, compulsory excess is applied to your policy no matter what – this is decided by your insurer.

If you’re a young or inexperienced driver, don’t be surprised if your compulsory excess is higher than someone who's older or has been driving for a while.

This is because new and young drivers fall into a higher-risk category, so there’s usually an extra excess added. This should be clearly noted on your policy, though.

You might also have an additional excess to pay if you drive a luxury or high-performance car.

 

What does voluntary excess mean?

Voluntary excess works differently because you set the amount of excess you’re willing to pay. Increasing this voluntary excess is one way many people are able to lower the cost of their car insurance.

When you get a car insurance quote, it’s worth looking at how changing the voluntary excess affects your price, and choose an amount that you’re comfortable with.

But remember that, if you make a claim, you might have to pay both the voluntary and compulsory excess. 

 

Should I increase my voluntary excess?

One way of looking at voluntary excess is that you’re putting a bet on how likely you are to not make a claim*. The higher your excess, the higher the bet.

Consider yourself to be a careful driver with a low chance of being involved in an accident? You might be more confident in taking on this risk and could use it as a way of cutting your insurance costs

 

How else can I lower my insurance?

If you decide that you’d rather not risk taking on a higher excess, there are other ways to lower your car insurance costs:

  • Improve your car security. The harder your car is to steal, the less of a risk it is
  • Be accurate with your mileage. Overestimating how much you drive could make you pay over the odds
  • Always shop around. Letting your car insurance auto-renew could cost you a pretty penny
  • Update your policy. No longer commute to work in the car? Let your insurer know and it could save you some cash.

When do you pay excess on car insurance?

You pay your compulsory and voluntary car insurance excess when you make your car insurance claim

However if you’re only involved in a minor accident, you might find that your total excess is more than the cost of repairing the car.

This is especially if you’ve chosen to increase your voluntary excess.

In these cases you have to decide if it’s worth claiming on your insurance at all. Remember that you should let your insurer know about any accident you have, even if you don’t claim. 

* This is purely for illustrative purposes. Insurance doesn’t work like that in real life - it’s much more complicated and involves a lot of spreadsheets.