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Understanding ‘excess’ on a motor insurance policy

Insurance doesn’t have to be a confusing territory to navigate. Here, we answer your most important questions about excess, from what it is, when you need to pay it, and what factors contribute to it.

What is an excess?

An excess is an amount you contribute towards the cost of your insurance claim. An insurer may have many types of excesses that can apply in different situations or apply concurrently.

A basic excess may apply to your insurance policy and the amount may vary depending on the make and model of your vehicle You may be able to choose the value of this excess by opting for a higher or lower amount when you take out your policy.

When you make a claim on your motor insurance policy for example, the damage is valued at $5,000 and your excess is $500, you would simply pay the $500 and your insurer will cover the remaining costs of $4,500 to repair your vehicle.

There are also different types of excess that may be applied to your insurance policy in additional to the basic excess such as:

  • age excess – applies when the driver of your vehicle is less than 25 years of age
  • inexperienced driver’s excess – applies when the driver of your vehicle is 25 years of age or over and has not held a driver’s licence for the two consecutive years before the claim occurs
  • additional excess – applies when we have agreed to cover your vehicle, or any person authorised to drive your vehicle, under special terms.

When do you need to pay an excess?

An excess is generally only paid by you if you are making a claim for an incident which is your fault. If you are not at fault in the case of a vehicle accident, you wouldn’t normally have to pay the excess, the other party at fault does. However, if the other party cannot be identified, then you may still have to pay the excess. You’ll be advised at the time of making a claim if you need to pay your excess.  

How does the excess contribute to your premium?

You can normally choose the amount of excess you want to pay on your insurance. However, do remember that the lower your excess the higher the premium will be. If you want a low excess you’ll have to pay a little extra each month for your insurance, whilst if you want a lower premium each month you can choose to have a higher excess. The excess is the amount you contribute towards a claim. If you selected a higher excess this means you will contribute more at the time of a claim and you will have a lower premium during the policy period. A lower excess would mean you would pay a higher premium during the policy period.

Depending on your financial situation and if you believe you’ll have the money to pay for a higher excess in case of an incident, then you’ll need to choose a sweet spot of excess. For more information about Car Insurance, contact CGU today on 13 24 81.