What does excess mean?

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Written by Michael Foote , founder of Quote Goat, with over 13 years experience working in the finance, insurance and currency sectors.

Each vehicle on the UK roads needs to have insurance so that in the event of an accident, a fire, theft or vandalism repairs can be made, or the vehicle can be replaced. To do this, insurance providers require drivers to pay an annual amount, in one go or in monthly instalments. They will then make funds available when drivers claim after an incident.

Each insurance provider will also have an amount known as an “Excess”, which is the amount you will have to pay towards any claim you make. This excess is usually made up of a voluntary and mandatory (compulsory) excess charge.

Compulsory excess

Your compulsory excess is the amount that you will have to pay. The amount is set by your provider when you take out a policy and is unchangeable. Compulsory excess charges differ due to the type of car or your own circumstances. Generally, the higher risk you are deemed to be the higher your compulsory excess will be.

Voluntary Excess

Your voluntary excess is an amount that you will agree upon with your provider at the start of your policy and can be changed. This amount is how much you choose to pay on top of the compulsory charge.

You may be thinking: why should I agree to pay any sort of voluntary excess if I don’t have to? But paying higher voluntary excess charges will reward you with cheaper car insurance premiums throughout the year. So, if you consider yourself a safe driver then you may want to agree to a slightly higher voluntary excess in order to keep your monthly payments down. Be wary, however, because if you need to claim on your insurance then you will need to pay both your compulsory and voluntary excess charges, so don’t set yourself a limit that you won’t be able to afford in a one off payment.

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