What is excess in car insurance?

There are many decisions that you need to take when choosing a car insurance policy, one of which is deciding on the excess. 

Car insurance excess is the percentage of the insurance coverage that you agree to pay when you file an insurance claim. Typically, when you make a car insurance claim there will be an initial portion you will need to cover yourself, before the insurance coverage kicks in.

Since the insurer won’t have to bear the full claim settlement, deciding on a higher excess may help lower the cost of your car insurance premium. However, given that you only need to pay the excess in the (hopefully) rare instance that the worst does occur, you will need to consider your budget when deciding on the amount. 

There are multiple types of car insurance excess, so it’s worth familiarising yourself with these terms before you apply for any car insurance policy.

What is car insurance excess?

As stated, excess in car insurance is the out-of-pocket cost you may need to pay when you lodge an insurance claim before the insurance company’s coverage kicks in.

In Australia, you may come across a range of excess types charged when you make a claim through your car insurer, including:

• Standard excess
• Voluntary excess
• Age excess
• Inexperienced driver excess
• Driver history excess

Standard excess

The basic amount of excess you will be expected to pay when you make a claim. This is usually based on personal circumstances, such as your location, the make and model of the vehicle and your claim history. 

Voluntary excess

You may choose to pay a higher excess voluntarily to help lower the cost of your car insurance premium. Keep in mind that this does mean higher ongoing costs for your household budget, so carefully consider your financial situation before deciding on voluntary excess. 

Age excess

You may need to pay an additional excess if any drivers involved in an accident are under the age of 25. This is because younger drivers in Australia are considered ‘high risk’ by insurance companies. 

Inexperienced driver excess

Just as with age excess, an insurer may impose an additional excess if any drivers involved in a claim are considered ‘inexperienced’ - aka are still on their provisional licence and have not held the licence for a specified period. 

Driver history excess

As car insurance costs are risk-based, you may also find an additional excess imposed by the insurer if the driver involved in a claim has had their licence suspended, disqualified, or restricted within a specified period prior to the insurance policy.

When do you pay excess on car insurance? 

Usually, if you are at fault for an accident you will have to pay the car insurance excess amount as part of the compensation or cost of damages for which you are liable, with the insurer covering the amount over and above the excess.

You may also have to pay the excess if you were in an accident but the at-fault driver cannot be traced or was uninsured. While you can dispute paying the excess in some cases, it is possible that your insurer may deduct the excess from the settlement or refuse to cover the cost of damage.

In Australia, as per the Australian Financial Complaints Authority’s regulations, your excess may be waived on your car insurance if you can establish that you are facing financial troubles. However, you may still need to pay additional excess in some cases, such as when someone not listed on your insurance policy caused an accident.

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