What is a car insurance excess?

Wondering what a car insurance excess is? Wonder no more

Almost every industry in the world is rife with lingo, jargon and technical terms that can seem unfamiliar to an outsider, and car insurance is no different.

From third party and comprehensive insurance, to premiums and no-claims bonuses, there are a fair few terms surrounding insurance that are worth knowing, one of which is car insurance excess.

Here, we’ll take you through the ins and outs of car insurance excess, including details such as the difference between compulsory and voluntary excess.

Car insurance excess meaning

Excess, in a general definition, means ‘beyond the usual or specified amount’. When applied to car insurance, this sense of being beyond a specified amount also applies, in that in the event of you needing to make a claim on your policy, there will be an amount of money that is in excess to the sum that your insurer will pay out.

Let’s say you have a collision and your car requires repairs costing £5,000. If your excess is £500, the insurance company will only pay £4,500 to the repair shop, leaving you to pay the remaining £500.

Insurance excess exists mainly to prevent people from making lots of small claims. A car-park ding that might cost a dent specialist £300 to pull out would not be worth making a claim for if your excess is £500, for example, as it would actually cost you more to get fixed if going through your insurance provider.

It may seem a little unfair that car insurance discourages claims such as these, but physical repair and replacement costs comprise one aspect of the costs an insurance company incurs: administration and transport costs, for example, can be significant, and if everybody claimed each time they kerbed an alloy wheel, or scratched their paintwork on a zip or handbag, claims would skyrocket, and car insurance as a whole would get much more expensive for everyone.

It’s also worth pointing out that many insurance policies come with windscreen cover, which will see a windscreen repaired or replaced with a minimal excess that’s a different amount from the main excess, with a windscreen claim often not affecting your no-claims bonus. A similar principle works for add-ons like ‘lost key cover’: if you pay extra for this, you won’t have to pay the main excess if you lose your car keys.

What’s the difference between compulsory and voluntary excess?

Car insurance excess comes in two forms: compulsory and voluntary.

As you might expect, one you have to pay, and one you can opt to pay. Here’s how it works:

Compulsory car insurance excess explained

A compulsory excess is set by your insurance company, cannot be changed, and must be paid (or, rather, deducted from the payout from your insurer) in the event of a claim. The compulsory excess is calculated based on the risk you are gauged to present to the insurer – although some insurers may offer lower excesses than others if you are cross shopping using a price-comparison website.

Voluntary car insurance excess explained

As well as the compulsory excess, some insurers allow you to choose to add a voluntary excess in return for a reduced premium.

Say your compulsory excess is £500 and your premium is £700. The insurer may ask you if you want to have a voluntary excess as well. If you choose not to add this, the premium will remain £700.

Voluntary excess tends to work on a sliding scale. So if you set your voluntary excess at £250, the premium might drop to £600, while if your set your voluntary excess to £500, the premium might drop to £450.

If you need to make a claim, though, your insurance company will not pay out for the £500 compulsory excess, nor whatever voluntary excess you set. In the scenarios above, if you need to make a claim, you could be left with a bill of £750-£1,000 for repairs, depending on what you set the voluntary excess to.

Go.Compare says:

If you’re looking for cheaper car insurance, increasing your voluntary excess might lower your premium – but doing this comes with risks. If you’re in an accident and need to claim, you’ll have to pay that voluntary excess along with the compulsory amount. So you might end up paying more.

There are other ways to get cheaper car insurance – like comparing quotes from lots of insurers, or opting to pay annually to avoid monthly interest. So only increase your voluntary excess to an amount you’d feel comfortable paying if you had to claim.

Go.Compare has an Excess Refund Reward* for their customers, which means they’ll refund up to £250 if you have to make a claim. It’s free to opt in to, and there’s no tricks or surprise fees. It’s just their way of giving customers even more peace of mind when it comes to car cover.

Tom Banks, a motor insurance expert at Go.Compare says, “Whether you’re using a price comparison website or getting a quote directly from an insurer, it’s always worth tweaking the details to see how it affects your quote. Check out how different voluntary excess amounts change your price. Like if upping it by £50 knocks £100 off your premium and you don’t claim on your cover for the year, you could end up saving yourself a lot of money.”

When do you pay excess on car insurance?

Aside from if you have an add-on like lost-key or windscreen cover, you would need to pay the excess whenever you make a claim on your car insurance.

This is true even if you were involved in a collision that was not your fault, although if the claim was proved to be someone else’s fault and all costs are recovered from their insurer, you may be able to recover the excess.

How much is my car insurance excess?

Your compulsory excess will be set by insurance providers based on the risk you and your car present to them, so this will vary depending on your circumstances, but a typical compulsory excess might be £200 if you represent a relatively low risk to a company.

Voluntary excesses, as detailed above, can be set by you on sliding scale, but they typically range from £200 to a maximum of £1,000.

Can I change my car insurance excess?

Not the compulsory excess, no – that’s set by the insurance company – although you can shop around for a better deal from different insurance companies.

When it comes to the voluntary excess, you can indeed change this. In addition to being able to set it when you take the policy out, you can generally change it mid-way through the policy, although clearly if you drop the voluntary excess you will likely have to pay to top up your premium. Do also note that if you are in the middle of a claim or are about to you make one following a collision, you cannot change the voluntary excess for that claim.

Car insurance excess FAQs

Do I need to pay my car insurance excess if I’ve been in an accident that wasn’t my fault?

Yes, you do, as this is the amount you agreed your insurer will not pay out in the event of a claim – although if a collision is found not to be your fault, you may be able to recover the excess amount from the other party.

What if I can’t afford to pay my car insurance excess?

Some insurance companies may offer payment plans to help you pay off the excess in increments over time, so speak to your provider and see what help they can offer.

What is excess protection insurance?

Excess protection insurance is essentially insurance for insurance: for a small additional premium, it will pay your excess for you if you need to make a claim. Do note that the higher your excess, the higher the cost of excess protection insurance will be.

Will my car insurance excess increase if I make a claim?

Yes, this is a highly likely scenario. You can pay extra to have your no-claims bonus protected, which can help reduce the chances of this happening, but all insurance companies will ask you if you’ve made a claim within the last five years when taking out a policy, so you may find cover becomes more expensive, regardless of whether your no-claims bonus was protected.

Can I set my excess to £0?

According to the experts at Go.Compare, it is possible to set your voluntary excess to nothing. So if you have to claim on your insurance, you’ll only have to pay the compulsory excess.

But most insurers will offset this by increasing your premium – so you could end up paying more for your cover, especially if you don’t have to claim during that policy period.

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*Up to £250 refunded after claim is settled. Excludes breakdown and windscreen repair or replacement. Full T&Cs apply.

This article is written and reviewed in collaboration with Go.Compare, a comparison site for insurance policies, financial products, energy tariffs and more. Go.Compare is authorised and regulated by the Financial Conduct Authority. Carwow’s relationship with Go.Compare is that of a business partnership, no ownership or control rights exists between us.