What is excess in car insurance?

What is excess in car insurance?

There are many decisions that you need to take when buying a car insurance policy, one of which is deciding on the excess or the percentage of the insurance coverage that you agree to pay when you file an insurance claim.

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

Why do I need to decide the excess in my car insurance policy?

When you buy a car insurance policy, the insurer may ask you to set a certain amount as the excess, which you will be expected to cover when filing an insurance claim. Suppose you are at fault for an accident, and you are liable to pay the treatment costs, damages, and compensation for the other driver. In that case, your insurance provider will only pay you a claim settlement if the costs are more than the excess amount. In some cases, the insurer may ask you to pay the entire cost and then reimburse you the claim settlement amount after deducting the excess. 

What you pay for your insurance policy can depend on how much you choose to pay as excess. If you pay a greater excess, the amount the insurer will have to cover is lowered and so is your insurance premium.

While some insurers may be okay with you buying a zero excess car insurance policy, this is not a recommended practice as it will likely result in you having to pay a much higher premium. However, depending on your profile and driving history, you may not be able to lower the basic excess for car insurance below a certain minimum.   

What is a voluntary excess in car insurance?

Usually, your car insurance premium is based on your age, gender, and area of residence as well as your driving and claims history. In the standard scenario, you suggest a certain amount as the excess when buying the policy, and the insurer agrees to cover whatever remains to be paid when you file a claim. Even if the insurer insists on a minimum amount as excess, you can choose to pay a voluntary excess higher than the minimum and bring down your car insurance premium accordingly. 

However, you should consider your financial situation before deciding on the voluntary excess to make sure this is within your budget. You may want to set aside the amount in a particular bank account to make sure you don’t fall short when it is needed. You should ask your insurer about special circumstances, such as filing a windshield damage claim, in which you may be asked to cover a higher excess than the amount agreed. You can also consider finding out if there are situations when you may not have to pay the excess at all.

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, you may get a waiver of the excess 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.

Some insurers may also ask you to cover a higher excess even if the accident was caused by someone listed on your policy if that person is considered to be a high-risk driver. Younger drivers, especially those under 21 years of age, may find that their insurer will insist on a certain minimum amount as the excess.  

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Learn more about car insurance

Can you insure your car for 6 months?

Most Australian insurers won’t offer you a 6-month car insurance policy, so you may need to buy a policy that covers your car for damages and cancel it after six months. You will need to purchase comprehensive car insurance to protect your car from accidental damage, theft, vandalism, or natural disasters.. 

Consider checking whether your 6-month comprehensive car insurance will cost more if you pay monthly or six-monthly premiums instead of a one-time annual premium. Another question to ask the insurer is whether you’ll need to pay administration or cancellation fees when you cancel the policy.

Alternatively, you can look for a suitable ‘pay as you drive’ car insurance policy, which usually offers you the coverage of a comprehensive car insurance policy but only requires you to pay for the distance driven. Such a policy may not be the ideal 6-month car insurance plan as it is based on how much you drive rather than for how long. If you need to drive a lot, you may end up paying more than you’d pay for regular car insurance. 

Does insurance cover a stolen car if keys were in the car?

A car insurance policy that covers the theft of your car, such as third party fire and theft insurance, usually covers a stolen car, even if the keys were in the car’s ignition.

However, your insurer may deny the claim if you live in an area where there have been several car robberies reported recently. They will see you leaving the keys in the car as a case of negligence. In such cases, your insurance provider may even expect you to have installed anti-theft security measures in your car. 

You may need to confirm whether or not you left your keys in your car, and if they had been stolen or misplaced, before filing your car insurance claim. The loss or theft of your car keys may be covered by a comprehensive car insurance policy, but usually as an optional item.

If you can confirm that your car keys were stolen, mention this in your claim as this will help establish that your car was not stolen as a result of your negligence.

Can I drive a new car without insurance?

It is illegal to drive a car in Australia without insurance. Most states require that you get your insurance in place before you drive the car off the dealership’s plot. So, the answer to whether driving a new car without insurance is no, it is not allowed.

The only time you can possibly legally drive an uninsured car is when you have to get the vehicle registered. You should drive straight to an inspection station or your state's vehicle registry. You must also make sure that you take the most direct or convenient route possible.

It is important to note that your compulsory third party insurance (CTP or green slip) isn’t valid until your car is registered.

Driving an unregistered or uninsured vehicle can have severe legal repercussions. If you are involved in an accident, and are driving an unregistered and uninsured vehicle, you will be personally liable to pay compensation to anyone hurt, as well as for damages. If you are caught driving a vehicle without insurance, you may be fined or even have your vehicle seized.