Understanding Car Insurance Excesses

The cost of motor insurance often represents one of the largest payouts you’ll make for the privilege of owning a car. Unfortunately, it doesn’t look likely to get better any time soon. A recent survey found that the average cost of car insurance premiums in the UK is now £514.38 – the highest figure since records began in 2005, and an increase of 5.8% over last year . Of course, there are ways of reducing your premiums, but these can involve making concessions about who is able to drive your car (cutting out named drivers, for example), having a mileage limit placed on your vehicle, or fitting additional safety devices such as a an industry-standard alarm. For whatever reason, these measures may not be suitable for your insurance needs. But what can you do? Having a larger excess on your car insurance is one of the easiest ways to save money on your premiums.

An excess is defined as the amount you have to pay before your insurance kicks in. Let’s say, for example, it’s set at £100. You pay the first £100 of any claim you make, and the insurance picks up the rest of the bill. This works out great for any major damage – if you write your car off and it becomes unfeasible to repair it – but means that you’re less likely to claim for small damages. If you’re involved in a minor incident that’s only going to cost £150 to repair, you’re not likely to cash in your no claims bonus for the sake of the £50 you’d get from the insurance company (as you’re still liable for finding the first £100 yourself).

If you choose to have a larger excess on your policy, your insurance provider will likely offer you a discount on your cover. This is because you represent a lower financial risk to the insurance company, even if you’re still a relatively high risk in terms of your age, gender, or history (in fact, the riskier you are, the higher an excess your provider will generally insist on before they’ll insure you anyway). If you crash while you have a high excess, the insurance company isn’t liable for as much of the repair bill, and so is no worse off as a result.

However, while it might save you money, it’s important to note that paying the excess is a prerequisite of getting your car repaired. If you can’t afford to meet the bill, you won’t be driving anywhere for a while, as you won’t be able to make the claim. As such, it’s absolutely crucial that you don’t get an excess on your policy that’s higher than you could legitimately expect to repay in the event of an accident or other damage to your car.

While car insurance excesses can be a great way of manipulating your premiums in your favour, don’t be fooled into thinking that it’s an easy solution to every high insurance fee. You can end up getting burned pretty badly if you overestimate your ability to pay, especially if the damage is only minor, but at the same time you can save yourself quite a bit of money.