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Find out about car insurance excess and how it works in this useful guide.
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When taking out car insurance, a crucial factor to consider is your excess. Excess plays a significant role in the event of a claim, so it’s important to understand how it works and the financial implications of setting and paying it.
This informative guide covers what excess is, how much it could cost and when you might need to pay it, as well as what the different types of excess are.
In Australia, the excess is an integral part of a car insurance policy. It refers to the amount of money a policyholder is required to pay towards a claim before the insurance company contributes the rest in a covered event.
Example: your car is in an accident and repairs come to $2,000. Your excess is $400, meaning you have to pay for the first $400 of the claim, after which your insurer can cover the remaining $1,600.
Paying an excess is a way to share the risk between the policyholder and the insurer. It also:
The circumstances in which you need to pay your car insurance excess can vary depending on the specific policy and the nature of the claim. Common situations include:
Your excess will be determined when you buy car insurance and will depend on several factors, such as the type of car insurance policy you have and your circumstances. The specific excess amount for your policy should be outlined in your insurance documents. Generally, higher excess amounts result in lower premium costs, while lower excess amounts may lead to higher premiums.
Different types of excess may also apply depending on the type of claim or specific conditions, so it’s essential to review your policy and understand the excess amount applicable to your coverage. For example, if the incident involves a young driver, you may have to pay an age excess on top of your standard excess amount.
In certain cases, depending on your car insurance policy, you may not be required to pay an excess. This could include:
When making a claim on your car insurance, you'll typically need to pay the excess before the claim can be finalised. However, the payment process may vary depending on your provider or type of claim. Generally, there are three ways an excess payment can be made:
The excess is usually paid as a lump sum, although you may be able to pay in instalments if your insurer agrees.
Deciding between a high or low excess depends on your personal circumstances and risk tolerance, so it’s important to weigh up the pros and cons to decide the best choice for you. Here’s a closer look at the implications of having a higher or lower excess:
This is the basic excess amount that can apply to all types of claims and is an essential component of most car insurance policies. It is a predetermined fixed amount set by the insurance provider, taking into account factors such as where you live, the type of vehicle you own and other risk considerations.
Some insurance policies allow you to choose a voluntary excess in addition to the standard excess. This may give you more control over your insurance costs and enable you to lower your premium.
Insurance providers may impose an additional excess for drivers below a certain age, typically under 25 years old, or inexperienced drivers. This excess reflects the higher risk associated with less experienced drivers.
An excess may be imposed if an unlisted or unauthorised driver was driving the insured vehicle at the time of an incident. This encourages policyholders to ensure that all drivers who may use the vehicle are listed on the policy.
A driver history excess may be applied if the driver has a history of claims or driving offences and is intended to reflect the increased risk associated with their past behaviour.
Some policies have a separate excess specifically for windscreen damage or replacement. It can be a lower excess compared to other types and is designed to cover the costs of repairing or replacing damaged windscreen glass.
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Savvy’s comparison service includes selected products from a panel of trusted insurers and does not compare all products in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy. We always recommend readers to consult the Product Disclosure Statement (PDS) of different policies before purchasing your car insurance.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
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© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.