Should I increase my insurance excess to reduce my premium?

Choosing a higher insurance excess can often see a reduction in the premium you are charged for cover. However, the consequences of doing this means you could be left with a large bill if you make a claim. We take you through the advantages and disadvantages of choosing a higher excess on your insurance. 

What is an insurance excess?

This is simply the amount you will have to pay towards the cost of a claim you make on your insurance. This amount must be paid before your insurer pays anything towards the claim. 

For example, if you have an accident in your car your motor insurer will assess the cost of the damage to the vehicle. Let us say the cost of the repair was £1000 and you had an excess on your motor insurance of £300 then this means you pay the first £300 towards the repair and the insurer pays the remaining £700.

Different types of insurance excess

There are two types of insurance excess:

• Compulsory -  this is set by your insurer and is the minimum excess you will have to pay. This often is higher if you are a younger or inexperienced driver

• Voluntary - this is an extra excess amount you can select to pay. Often the more you pay the lower your premium. 

Your motor insurer will combine your compulsory and voluntary excess to provide your total excess amount. So if you have a £250 compulsory excess and a £250 voluntary excess then you will have to pay the first £500 of any claim you make on that insurance policy. 

Why would you opt to pay a higher voluntary excess?

On the face of it, it may seem a strange idea to want to pay more towards the cost of any claim. However, the impact of doing this is that it can see a reduction in the overall cost of your annual premium. If you balance this saving against the likelihood of making a claim on your cover then that can help you determine whether it is a worthwhile exercise for you. 

You must remember, a higher excess means you are paying that figure towards the cost of the claim. You need to be sure you can afford that if you did claim. 

Who may have to pay a higher excess?

Some drivers have a higher excess imposed on them by their motor insurer automatically. The obvious group this would happen to are younger, less experienced drivers. As these drivers may be statistically more likely to make a claim, the motor insurer may increase the compulsory excess to protect their exposure. 

Who may opt to take a higher excess? 

Again, young and inexperienced drivers may opt to increase the excess they will pay in a further attempt to drive down their annual premium costs. Clearly this can be a gamble as if they do have to claim then they will have to pay this excess first.  

At the other end of the scale, older and more experienced drivers may look at taking a higher excess to get the cost of their motor insurance down. They could take the view that they are unlikely to make a claim and therefore the chances of having to pay the higher excess are lower. 

How to cover the cost of your excess

The obvious answer is you could leave the amount of excess you may pay in a savings account. But not everyone is lucky enough to have that option open to them. Tying up that much money is not always ideal. 

If you are considering opting for a higher excess contribution then there are options to consider that can help. There are excess insurance policies available that mean you can cover the cost of paying your excess, if you have to use it. 

At Total Loss Gap we offer Motor Excess Insurance to cover the costs of excess charges. You can take a maximum excess cover of between £250 and £1500 for an annual policy. This effectively gives you a credit to claim against should you make a claim on your motor insurance cover. 

Key things to remember about Motor Excess Insurance

You must be charged your excess by your motor insurer. You can then claim it back from the motor excess insurance policy. 

In order to be charged your excess by your motor insurer then the cost of your claim must be equal, or more than your excess. So, for example, if you have a £1000 excess and the claim is only £800 then you cannot be charged your excess, and therefore you cannot claim it back from your motor excess insurance. 

Motor Excess Insurance from Total Loss Gap will only cover claims against the main motor insurance. It will not cover excess charges for windscreen claims, for example. 

So there you have it. How adjusting your excess on your motor insurance could save you on your annual premium. And how you can mitigate the chances of paying your excess if you make a claim with a motor excess insurance.