Did you know that less than half of UK motorists understand their compulsory and voluntary car insurance policy excesses?

What is insurance excess?

The vast majority of vehicle insurance policies have an excess, which is composed of a voluntary and a compulsory amount. An excess is the amount of money you can expect to pay if you need to make a claim, which will go towards the overall costs of the repairs needed.

However, insurance excess isn’t something that solely applies to vehicles, it also applies to many other types of policy including health, pet, home and travel. When hiring a vehicle, it makes sense to take out car hire excess insurance. You can compare policies using a tool such as Moneymaxim.

What is compulsory excess?

As its name suggests, your compulsory excess figure is the amount of money you will need to pay to your insurer if you make a claim. This figure is calculated by insurance companies who consider a range of factors, including the specifics of the claim you’re making, your age, and how old your vehicle is.

Typically, compulsory excess fees are higher for drivers who have only recently passed their test and for people driving vehicles in high insurance groups.

What is voluntary excess?

Your voluntary excess figure is the amount of money you will pay towards claims made following an accident. This amount will be selected by you when you take out or renew your vehicle insurance policy.

As this Which? article explains, while agreeing to pay a higher voluntary excess can lower your insurance premiums, it is important to select a figure that makes sense for your personal financial circumstances.

Don’t forget – the value of repairs for a claim must exceed your total excess figure, otherwise you will be unable to claim.

How car insurance excess works

When making a claim on your policy, your compulsory and voluntary excess figures will be combined, which is called your total excess. This amount of money must either be paid to your insurer up front or it will be deducted from your final settlement.