Car insurance excess, also known as a deductible, is the amount you pay out of pocket before your insurance coverage kicks in for a claim. If you’ve ever wondered why your car insurance excess seems unusually high, you’re not alone. Various factors can influence this amount, and understanding them can help you make more informed decisions about your car insurance policy.
What is Car Insurance Excess
Definition of Car Insurance Excess
Car insurance excess is the portion of a claim that the policyholder must pay before the insurer covers the rest. For instance, if your excess is $500 and you make a claim for $2,000, you pay the first $500, and your insurer pays the remaining $1,500.
Types of Car Insurance Excess
There are generally two types of car insurance excess:
Compulsory Excess: This is set by the insurer and cannot be changed. It’s based on factors like the type of car you drive and your driving history.
Voluntary Excess: This is chosen by the policyholder. Opting for a higher voluntary excess can lower your premium but increases your out-of-pocket expense if you make a claim.
Factors Influencing High Car Insurance Excess
Driver Age and Experience
Young and inexperienced drivers often face higher excess amounts. Insurers consider them high-risk due to their limited driving history and higher likelihood of accidents.
Type of Vehicle
High-performance or luxury cars typically come with higher excesses. These vehicles are more expensive to repair and replace, leading insurers to mitigate their risk by imposing higher excesses.
Driving Record
A history of traffic violations, accidents, or claims can result in a higher excess. Insurers view drivers with poor records as more likely to file claims.
Location
Where you live plays a significant role. High-crime areas or locations with high accident rates often result in higher excesses to account for the increased risk.
Policy Details
Some policies offer lower premiums in exchange for higher excesses. This trade-off is attractive to those looking to save on monthly costs but can be costly if a claim is necessary.
How to Manage High Car Insurance Excess
Compare Different Policies
Not all insurance policies are created equal. Shop around and compare policies from different insurers. Look for ones that offer a balance between premium costs and excess amounts.
Adjust Your Voluntary Excess
If your policy allows, adjust your voluntary excess to a more manageable level. While this might increase your premium, it can reduce your out-of-pocket expense in the event of a claim.
Improve Your Driving Record
Maintaining a clean driving record can lead to lower excess amounts over time. Avoid traffic violations and accidents to improve your standing with insurers.
Choose a Less Expensive Vehicle
If possible, consider driving a vehicle that is less costly to insure. High-performance and luxury cars tend to attract higher excesses. Switching to a more practical car can help lower your insurance costs.
Increase Security Measures
Enhancing your car’s security can lower your risk profile. Install alarms, immobilizers, or tracking devices. Some insurers offer discounts or lower excesses for vehicles with these security features.
The Impact of High Car Insurance Excess
Financial Burden
A high excess can place a significant financial burden on policyholders. In the event of a claim, the out-of-pocket expense can be substantial, leading to financial stress.
Claims Decisions
High excess amounts might deter you from making smaller claims. If the cost of repairs is close to the excess amount, you might choose to cover the costs yourself, effectively reducing the benefit of your insurance policy.
Premium Savings
Opting for a higher excess can lower your insurance premiums. This trade-off can be beneficial if you rarely make claims, allowing you to save money over the long term.
Case Studies
Young Driver with High Excess
John, a 20-year-old driver, faced a high excess due to his age and lack of driving experience. He decided to improve his driving record and took a defensive driving course. Over time, his insurer reduced his excess, making his policy more affordable.
High-Performance Car Owner
Emma owned a high-performance sports car and faced a high excess. She compared different policies and found one that offered better terms. Additionally, she installed an advanced security system in her car, further reducing her excess amount.
Experienced Driver in High-Risk Area
Mike, an experienced driver living in a high-crime area, faced a high excess. He decided to install a tracking device and park his car in a secure garage. His insurer recognized these measures and lowered his excess, making his policy more manageable.
see also: When Can I Cancel Car Insurance?
FAQs
1. What is the difference between compulsory and voluntary excess?
Compulsory excess is set by the insurer and cannot be changed, while voluntary excess is chosen by the policyholder. Increasing voluntary excess can lower your premium but increases your out-of-pocket expense if you make a claim.
2. Can I negotiate my car insurance excess?
While compulsory excess is non-negotiable, you can adjust your voluntary excess to a more manageable level. This might increase your premium but can reduce your out-of-pocket expense in the event of a claim.
3. How can improving my driving record lower my excess?
Maintaining a clean driving record can lead to lower excess amounts over time. Insurers view drivers with good records as less risky, potentially resulting in reduced excesses and premiums.
4. Does the type of vehicle I drive affect my excess?
Yes, high-performance or luxury cars typically come with higher excesses. These vehicles are more expensive to repair and replace, leading insurers to mitigate their risk by imposing higher excesses.
5. What can I do to lower my car insurance excess?
To lower your car insurance excess, compare different policies, adjust your voluntary excess, improve your driving record, choose a less expensive vehicle, and increase your car’s security measures. These steps can help you manage and potentially reduce your excess amount.
Conclusion
Understanding why your car insurance excess is high is crucial for managing your overall insurance costs. Factors such as age, vehicle type, driving record, and location play significant roles. By comparing different policies, adjusting your voluntary excess, improving your driving record, choosing a less expensive vehicle, and increasing security measures, you can effectively manage and potentially reduce your car insurance excess.
