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Motor Insurance - Your guide to the voluntary and compulsory excess

 

Motor insurance is a tricky subject, with people often getting confused about whether they are covered for any given incident or not. This article will explore some of the key questions on motor insurance and how it works, including what the terms "voluntary" and "compulsory" mean when it comes to excess charges.

 

What is Motor Insurance cover?

 

Motor Insurance is what you need to cover you to drive your vehicle on public roads. It comes in different types, some more comprehensive than others.

 

Third Party - this is the minimum compulsory level of motor insurance you must have. It covers you for claims from other people for damage you may cause.

 

Third Party, Fire and Theft - this will cover you for the same as 'third party' with the addition of cover where your vehicle is stolen of set on fire.

 

Comprehensive - this will cover you for damage or loss to your car, or a third party vehicle, in the event of an accident. It will also cover you for loss of vehicle due to fire, flood or theft.

 

Please take a look at our Comprehensive Guide to Motor Insurance.

 

What does insurance policy excess mean?

 

The excess is the amount that you have to pay towards a claim on your insurance policy.   motor insurance excess guide

 

For example, if you make a claim for £500 on your home contents insurance , and you have an excess of £100, the insurer may only pay out £400. The remaining £100 is something you would have to pay to ensure the claim is settled . This is how it works in most cases of a standard insurance policy excess.

 

There are some exceptions on certain types of insurance policies . For example, with motor insurance excess there is often a series of different excesses that apply to different parts of the claim.

 

For example, you may have an excess on the main part of your motor insurance (more about that in a moment) but you may have additional options and features, like windscreen or key cover, that will attract a separate excess deduction.

 

Motor Insurance excess - voluntary and compulsory

 

What is a compulsory excess for motor insurance?

 

A compulsory excess is an amount of money that is set by an insurance company that the policyholder must pay to the insurance company when a claim is made. In many cases, the compulsory excess is fixed as part of a quote or a renewal.

 

So if you have a compulsory excess of £250 on your motor insurance, and you claim for accident damage to your vehicle with a £1,000 repair cost then you must pay £250 towards the repair, with the insurer paying the rest.

 

What is a voluntary excess for motor insurance?

 

Voluntary excess is the amount above the compulsory excess you agree to pay if you make a claim. For example, your compulsory excess is £250 and you choose to have a voluntary excess of up to £250, then you will pay up to the first £500 costs of any claim.

 

For example, if you make a claim for damage to your car with a cost of £1000 then you will pay £500 (£250 compulsory excess plus £250 voluntary) and the insurer will pay the remaining £500.

 

So in summary:

 

Compulsory Excess amount - set by the insurance provider and is your contribution to a claim you may make.

 

Voluntary Excess amount - set by the policyholder as the contribution, in addition to the compulsory excess, that the policyholder pays towards a claim.

 

Why would you pay voluntary excess?

 

When you provide your details for a car insurance quotation, the car insurance premiums that you have returned include the motor insurance provider's compulsory excess amount.

 

If you then choose to include a voluntary excess amount you should see the annual car insurance premium reduce.

 

Why?

 

Well by adding a voluntary excess to the compulsory excess you are reducing the risk to the car insurance provider in a couple of ways.

  1. The total excess amount you have to pay before the car insurance pays towards the claim is such that it will lower the overall cost of settling claims for the car insurance.
  2. The total excess amount you have to pay towards the insurance claim means that some claims will not have to be paid by the motor insurer at all. For example, if you put in a car insurance claim valued at £1,000 and you have a combined compulsory and voluntary excess of £1,000 then your motor insurer will not have to pay anything. If you had no voluntary excess at all, and the compulsory excess is £500 then you would pay £500 and the car insurance would pay £500.

 

Is it better to have higher or lower excess?

 

This depends on what you are looking for. Paying a higher excess (and you can increase this by selecting a higher voluntary excess at quotation or renewal) should mean your annual car insurance quote premium prices are lower.

 

The amount by which increasing your voluntary excess affects your car insurance premium will depend from insurer to insurer. If you compare car insurance policies and premiums you will be able to see where you could find cheaper insurance.

 

However, if you choose to increase your voluntary excess contribution towards your motor insurance then you have to pay excess amounts any time you make a claim.

 

You have to balance up the cost of your overall motor insurance premium annually against the excess you have to pay if you make a claim.

 

Do I have to pay voluntary excess if not my fault?

 

If you claim your motor insurance that ends up being someone else's fault then you should expect that your motor insurer will claim back any excess, plus claim costs from the third-party insurer.

 

You may find that you have to pay the excess upfront, when the claim has been finalised, the cost of the excess will be refunded to you.

 

You can normally only claim your excess back if the claim is proven 100% to be the fault of the third party. If the claim is settled on a 50/50 basis then you may be able to claim 50% of your excess back.

 

Do you have to pay both compulsory and voluntary excess?

 

Yes, if the claim is made then the excess amounts set on your premium must be paid by the policyholder for a claim to be settled.

 

Do I have to pay compulsory excess?

 

If your motor insurer provides a car insurance quote with a minimum compulsory excess then you would have to pay this in the event of a claim.

 

Some car insurance quotes may come without any excess requirements at all, although they will normally be reserved for very low-risk policyholders.

 

Why is my compulsory excess so high?

 

This may be because your motor insurer deems the risk you provide as higher, and therefore they want to impose a higher compulsory excess before they accept the risk.

 

You could be a higher risk for several reasons:

  • The age of the policyholder or named drivers
  • The type of car you want to insurer
  • Your driving and claims history may indicate you a higher risk

 

Please note that different drivers named on your motor insurance may attract different compulsory car insurance excess amounts set by your insurer. For example, an older driver with a clean driving license and claim record may require a low car insurance excess. If you add an inexperienced driver with 3 points on their license and a claim in the last year they may attract a high car insurance excess amount.

 

Motor Excess Insurance

 

You can help protect against excess claims by taking out motor excess insurance. This can be utilised in the following way.   Motor Excess Insurance quote

 

You can take out your motor insurance policy, and add a voluntary excess amount to any compulsory excess the car insurance imposes. Let's say this is a combined £1,000.

 

You can then take out a Motor Excess Insurance policy to cover you excess costs of £1,000.

 

This means if you make a claim, pay the £1,000 excess immediately then you can then claim back your £1,000 excess from the Motor Excess Insurance policy.

 

Key aspects to consider when considering Motor Excess Insurance

 

The main thing to remember is that to be able to claim on a Motor Excess Insurance policy you must pay car insurance excess on a claim first.

 

So if you have a claim valued at £800 but your combined excess is £1,000 then your motor insurer is not going to settle the claim as the excess threshold has not been reached.

 

If you claim your motor insurance valued at £1,500, and you have a combined excess of £1,000 then your motor insurer will charge you your excess of £1,000 and settle the remaining £500 of the claim.

 

In this circumstance, if you have Motor Excess Insurance to cover the £1,000 combined excess, you can send in your receipt of the excess you have paid and claim this back.