Learn what excess is on a car insurance policy, the types available, and what it means for lowering your premium.
Whether shopping for car insurance or examining your existing policy, a key term you’ll find in it is excess. An excess is a type of contribution that you, as a driver, are required to pay towards a claim on your policy. Insurance companies may have various types of excesses. What applies in your case depends on the unique situation. When selecting a car insurance plan, it’s important to select an excess properly. It can, in fact, help lower your premium costs when you select wisely.
What to Look for in Car Insurance Policies
Most car insurance companies allow you to select the level of excess for your needs. This allows you to reduce the premium you pay (the higher you select, the less you’ll pay in excess). For most people, this is the best way to reduce your insurance rate. However, there are a few concerns to keep in mind. First, you should never select an excess that is too high for you to pay immediately. When you need to make a claim on your policy, you will need to pay more first. Many people are at risk of increasing their excess too high to achieve a higher level of savings, and then struggling with the payment at the time of a claim.
An excess helps to shift some of the risk of loss from the insurance company to you. An excess requires you to pay out of pocket before your insurance company does. As a direct result, insurance companies can reduce your rates.
What Types of Excess Are There?
The type of excess you are liable to pay are specifically listed on your policy. Consider these types of excess:
- Basic Excess: This applies to all claims. No matter the type of claim, you will pay the standard excess.
- Age Excess: This generally applies in situations where the driver is under 25 at the time of making the claim. It may apply in other situations as well.
- Age and Unlisted Driver Excess: When the driver involved in the incident is not listed on the policy directly, but is under the age of 25, this excess applies if it is included on the policy.
- Age and Inexperienced Driver Excess: If the individual is over 25, but he or she does not have at least two years of driving experience, this type of excess applies if it is listed on your policy.
- Additional Excess: In some cases, the insurance company may require a special or additional excess. This may be due to the vehicle or other circumstances related to previous claims.
In many situations, you do not have to pay the listed excess. This does not apply in situations where you are not liable in the accident. In that case, the driver at fault pays the losses. Carefully consider how much you can pay when selecting an excess limit. When choosing insurance, this directly impacts your costs.