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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. But it can be confusing to remember the differences between voluntary and compulsory excess.

Let's unpack the two terms and see what they both mean.

Toy houses sit on piles of money representing home excess

How does home insurance excess work?

Your home insurance excess is a fixed amount that you have to pay out if you make a claim on your home insurance policy.

Your insurance provider makes a deduction from the total claim, and gives you the rest.

Let's say you have an excess of £100 and you make a claim for accidental damage that's worth £100. 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 two different types of excess – a voluntary excess and a compulsory excess.

Voluntary excess is an amount that you decide. You can pay as little as zero, if you want.

Compulsory excess, on the other hand, is applied to every policy claim and it gets decided by your insurer. The amount varies, but it can be as low as £50.

Your voluntary and compulsory excesses are added together to get your total excess. This is the 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 won’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 claims are normally for large sums.

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

You should check the policy before signing up to make sure you’re happy with the excesses that apply. 

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?

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.

But you should always make sure you're able to afford both the compulsory and voluntary excess in the event of a claim.

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, if 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.


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.