Insurance: What you need to know about Excesses

By John Grant

An excess is the amount that you have agreed to contribute towards the cost of any claim you make. It can also be called a deductible with the literal interpretation being the amount deducted from the cost of the claim or repairs.

An Excess is the way an insurer maintains a balance between making insurance affordable and the mechanism to avoid them being involved in minor scrapes that are just not economically viable for them to spend time on. The Excess on your car will be dependent on a number of factors.

There is normally a base Excess, plus an additional age Excess and named-driver Excesses. An Excess can be a way of reducing the premium and many insurers allow you to choose a higher voluntary Excess, for which they will discount your annual premium cost.

The basic Excess under your policy will usual depend on the type of car and the experience of the driver.  A driver who has had a number of accidents or has a poor track record with speeding or other traffic offences may well be required to accept a higher Excess.

Underage Excess
The base Excess is usually for a driver over 25 years of age. (But in some cases this may be as high as 30 years of age.) If you are less than 21 years then you will have the highest Excess. Sometimes an under-21 Excess can also apply to drivers who have not held a drivers license for 2 years, no matter what their age. These drivers are referred to as ‘inexperienced drivers’.  The underage Excess is always additional to the basic Excess. A driver between 21 and 25 years will also have an additional Excess at an intermediate level. It assumes that they have more driving experience and are therefore less likely to have an accident.

The two Excesses (basic and age) are cumulative. If the basic Excess was $400 and the driver-under-21 was $750 then total Excess, would be $1,150. If they were between 21 and 25 then a lesser underage Excess will apply. This may be an additional $500 giving a total combined Excess of $900. However, the underage Excess is only applicable when the car is being driven by or is in the charge of someone under the stated age. For example, if a vehicle was parked and was damaged then the age Excess is unlikely to be applied as age was not a contributory factor in the accident and the insurer is not able to apply the age Excess.

Named driver Excess
An insurer is keen to know who will drive a vehicle. Some policies they will have higher Excesses applicable if the car is driven by someone who is not named in the policy. Then this Excess will be additional to all other Excesses.

Third Party Only policies
If the car is insured for third party or third party fire and theft, then the Excess is still applicable but becomes the amount deducted from the repairs to the other vehicle.

Excess recoveries
If you are not at fault in the accident then the Excess can be recovered from the at-fault party. If they are insured, then this is straight relatively forward. Your insurer will normally recover this for you. If the other party is not insured then your company will normally try and recover your Excess along with the overall reimbursement repairs to your car. Some insurers will not charge an Excess if you’re able to identify the other party, and this usually means identifying their car registration number as well.  It is needs to be clearly established that there was no contributory blame on your part.

Excesses are also sometimes not applied for glass breakage although in most policies you pay extra for this feature. They are also generally not applied if the claim was for a trailer attached to your vehicle. Policies differ from one insurer to another so it’s best to check with your company to see the circumstances in which an Excess is applied.