Most of us take personal insurance for granted, until the moment we actually need it. And when that moment comes, the fine details of your policy can suddenly feel overwhelming. One of the most important concepts that many people overlook is excess. Whether it’s for car insurance, home insurance, or even travel cover, understanding excess can save you money, stress, and surprises if you ever need to make a claim.
In this article, we’ll break down what insurance excess is, how it works, when it makes sense to opt for it, and what situations might make it better to avoid.
What Is Insurance Excess?
Insurance excess, sometimes called a deductible, is the amount of money you agree to pay yourself when you make a claim. In other words, it’s the portion of a loss that is not covered by your insurer.
For example:
- If you have a €500 excess on your car insurance and you make a claim for €1,500, you will pay €500 and your insurer covers the remaining €1,000.
- If the claim is smaller than your excess, say €400, then your insurer pays nothing, you cover the full cost yourself.
Excess can either be:
- Compulsory: set by the insurer and included in your policy, often based on the type of coverage or risk.
- Voluntary: an extra amount you choose to pay, typically in exchange for a lower premium.
How Does Excess Affect Your Premiums?
One of the biggest reasons people opt for voluntary excess is to reduce their insurance premiums. The logic is simple: the more risk you take on yourself, the less the insurer has to pay in claims, and that translates to a lower cost for you.
Example
- Car insurance with a €250 excess: premium might be €1,200 per year
- Car insurance with a €1,000 excess: premium could drop to €950 per year
The exact saving depends on the insurer, type of insurance, and your personal risk profile, but the principle is clear:
Higher excess = lower premium,
Lower excess = higher premium.
However, there’s a trade‑off. While choosing a higher excess can save money upfront, it means you must be prepared to cover that amount if you need to claim. For many people, this can lead to out-of-pocket expenses they hadn’t fully considered.
When Should You Consider Having an Excess?
Excess can be beneficial in certain situations. Here are some key points to consider:
1. For Smaller, Lower-Risk Claims
If you rarely make claims, a voluntary excess can be a smart financial decision. By taking on a larger portion of minor claims, you lower your annual insurance cost.
2. When You Have Savings Set Aside
Before opting for a high excess, make sure you can comfortably cover that amount if something goes wrong. For example, a €1,000 car insurance excess might not be a problem if you have the funds set aside, but could be a financial burden otherwise.
3. For Policies With Frequent Claims
For some types of insurance where claims are more frequent, such as travel insurance or some home insurance policies, it might be wise to keep your excess lower. This way, even a small claim can be covered, and you won’t have to pay out of pocket each time.
When Should You Avoid Excess?
While excess can save money, there are situations where it’s better to avoid it, especially if you want maximum cover:
1. For Expensive or High-Risk Items
If you are insuring high-value possessions, such as luxury cars, jewellery, or electronics, a low or zero excess is often the safer choice. Paying thousands in repair or replacement costs out of pocket could outweigh the premium savings from choosing a higher excess.
2. For Young or Inexperienced Drivers
In motor insurance, younger drivers or those with limited experience are considered higher risk. A high excess might lead to unexpected financial strain after an accident.
3. For Comprehensive Protection
If your goal is peace of mind and maximum coverage, for example, in home insurance or life insurance policies, avoiding excess ensures the insurer picks up the full cost of claims without requiring you to contribute.
What Types of Insurance Can Include Excess?
Excess is not limited to car insurance, it’s a common feature across most insurance types:
- Car Insurance
- Compulsory and voluntary excesses are standard.
- Applies to accidental damage, theft, or fire claims.
- Home Insurance
- Typically includes excess for claims such as fire, theft, water damage, or storm damage.
- Voluntary excess can reduce premiums, but may not be suitable for high-risk areas.
- Travel Insurance
- Excess often applies for medical costs, lost luggage, or cancellations.
- Some policies allow you to pay extra for a zero-excess option, especially useful for expensive trips.
- Pet Insurance
- Excess is common for vet fees.
- Choosing a higher excess lowers premiums, but you pay more for each claim.
- Health and Private Medical Insurance
- Some policies include excess or co-payments for hospital stays or treatments.
- Some policies include excess or co-payments for hospital stays or treatments.
Tips for Choosing the Right Excess for You
- Assess Your Risk Profile
How likely are you to make a claim? If you rarely claim, a higher voluntary excess could save money.
- Check Your Savings
Ensure you can cover the excess without creating financial strain.
- Consider Your Coverage Goals
If peace of mind and maximum coverage are priorities, a lower or zero excess is often worth the higher premium.
- Compare Quotes
Look at how different excess levels affect premiums across multiple insurers, sometimes the savings aren’t worth the additional risk.
- Review Your Policy Regularly
Life changes, moving house, buying a new car, or acquiring valuables, can affect what excess level makes sense. Reassess annually.
Conclusion
Insurance excess is one of those elements of a policy that can seem minor until you need it, but it has real implications for your coverage, premiums, and financial exposure. Choosing the right excess is a balancing act between lowering your premium and protecting yourself against out-of-pocket costs.
For smaller, low-risk claims, a higher excess can be a cost-effective choice. For high-value items, comprehensive protection, or those with lower savings, a smaller or zero excess offers peace of mind and ensures maximum coverage when it matters most.
Ultimately, understanding how excess works, evaluating your risk, and comparing options across providers is key. The right choice lets you enjoy the protection insurance is meant to provide, without unwelcome surprises.
Pallavi Singal is the Vice President of Content at ztudium, where she leads innovative content strategies and oversees the development of high-impact editorial initiatives. With a strong background in digital media and a passion for storytelling, Pallavi plays a pivotal role in scaling the content operations for ztudium’s platforms, including Businessabc, Citiesabc, and IntelligentHQ, Wisdomia.ai, MStores, and many others. Her expertise spans content creation, SEO, and digital marketing, driving engagement and growth across multiple channels. Pallavi’s work is characterised by a keen insight into emerging trends in business, technologies like AI, blockchain, metaverse and others, and society, making her a trusted voice in the industry.
