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Home insurance excess: compulsory vs voluntary explained

Home insurance excess works in much the same way as with a car insurance policy. In a nutshell, it's an initial amount that you're willing to pay towards a claim. But it can be confusing to remember the differences between voluntary and compulsory excess. And the amount you choose could impact your policy price.

Let's take a look at how excess on home insurance works.

Toy houses sit on piles of money representing home excess

 

What does 'excess' mean on home insurance?

Your home insurance excess is a fixed amount that you have to pay out if you make a claim on your home insurance policy. Luckily you don't actually hand over any cash to your insurance company - your insurance provider makes a deduction from the total claim, and gives you the rest.

For example, let's say you have an excess of £100 and you make a claim for accidental damage that's worth £1000. Your insurer keeps the first £100 and gives you £900.

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What’s the difference between voluntary and compulsory excess?

There are 2 different types of excess – a voluntary excess and a compulsory excess.

Voluntary excess

Voluntary excess is an amount that you decide. It tends to go up in £50 increments, but you can opt to pay as little as zero, if you want. 

Compulsory excess

Compulsory excess is applied to every policy claim and it gets decided by your insurer. The amount varies, but it can be as low as £50. The amount of compulsory excess is decided when you first buy a home insurance policy.

Your voluntary and compulsory excesses are added together to get your total excess. This is the total amount that gets deducted from your claim payout.

Opting to pay a higher voluntary excess could mean your home insurance costs are lower. This is because insurers don’t have to pay as much in the event of a claim.

But it does mean that if you do claim, you pay both your compulsory and voluntary excess.

For example, if you made a home insurance claim, your compulsory excess could be £200 and the voluntary excess £200.

In which case, you could be paying £400 if you claimed. If the claim was for £1,000, your insurer should pay you £600.

 

When do you pay excess on home insurance?

You pay home insurance excess whenever you make a claim on your policy, no matter how small the claim might be. On certain types of claims, different excesses may apply.

For example, if you have accidental damage cover as part of your contents insurance policy, the compulsory excess might be higher.

On buildings insurance cover, the excess for subsidence claims is likely to be substantially higher – around £1,000 is typical. That’s because these kinds of claims are normally for large sums.

Your excess may also depend on the type of home insurance policy you buy.

If you’re thinking about claiming on your home insurance, it’s worth weighing up the numbers.

For example, a small-value claim might not see you get a lot from your insurer because you have to pay your excess. And your no claims discount could also be impacted when you make a claim. 

 

How much voluntary excess should I pay on my home insurance?

You should always make sure you're able to afford both the compulsory and voluntary excess in the event of a claim. Take both into account when setting your voluntary excess, and only choose a figure you're comfortable with.

It's worth bearing in mind that a high voluntary excess might only save you money if you don’t end up making a claim. Also consider how much you’d want to claim for. Ideally, your voluntary excess should be below this figure.

This is because it might not make financial sense to claim for something that's less than or a similar cost to your voluntary and compulsory excess.

For example, let's say you think you’d claim for a stolen laptop that costs £500 and your compulsory excess is £100. You might night want your voluntary excess to be lower than £400.

This is to ensure that you’re not paying for the whole claim yourself.

 

Is there a minimum excess on home insurance?

This depends on the specific insurer. Many home insurance companies let you put in a voluntary excess of £0.

When you compare home insurance quotes with us, we'll give you the option of selecting different voluntary excesses for your buildings and contents insurance. You have the option of selecting:

  • £0
  • £150
  • £250
  • £400

Since your compulsory excess is set by the insurer, you don't have the option to change this. You can see a breakdown of your excess on a particular policy just beneath the price of each quote.

 

Does having a higher excess reduce my home insurance costs?

Generally, home insurance companies tend to reduce the cost of your policy if you opt for a higher voluntary excess. This happens because it cuts the amount of money the insurer has to pay out.

When you compare home insurance with us, you'll be able to raise and lower your voluntary excess and we'll update the prices we show you. You can use this as a gauge of how much you're comfortable putting in.

For example, does increasing your voluntary excess from £250 to £400 lower your costs all that much? And even if it did, would you be comfortable paying an extra £150 towards any home insurance claims you make?

 

How else can I reduce the cost of my insurance?

If you don’t think having a higher voluntary excess is the right move for you, there are other ways you could lower the cost of your home insurance. These include:

  • Paying annually instead of monthly. Monthly payments tend to add interest, which increases the cost of your home insurance policy.
  • Installing security devices could save you money as it makes your home less prone to burglary.
  • Maintaining your house to a good standard. This ensures your house is more resilient to storm damage and wear and tear.