All types of insurance policy carry what is known as an ‘excess’ fee. In practice this means that you and the insurer share the cost of any claim, with the amount stipulated in the terms and conditions deducted from any amount you’re awarded. The excess fee varies wildly between different policies, and many insurers offer use of an additional ‘voluntary’ excess fee, where you can increase the amount you’d be liable for, in return for lower premium payments.
Clearly the problem with this is that you’ll never get the full amount you’re entitled to, and there will be no value in making smaller claims should you opt to increase the voluntary excess fee, as you’ll be liable to foot most of the bill. As a way around this problem, there is now a new kind of policy available which can help you to keep your insurance costs down.
What is excess insurance?
Excess insurance is a separate policy taken out alongside your standard insurance contract, and as you may have gathered by now, insures you for any excess charges against that standard policy. There are in fact two types of excess insurance:
- Car Excess Insurance Specifically tailored for car insurance.
- Lifestyle Excess Insurance These are much more comprehensive and offer cover across multiple different policies such as travel, home, medical, pet, and others
Car excess insurance policies are becoming a popular way at the moment for containing the cost of standard car insurance. Taking out an excess policy effectively allows you to set a much higher voluntary fee on your standard policy than you might normally consider - bringing your monthly payments down as a result. You should bear in mind though, that in the event of a claim, you’d be liable to honour the excess fee on your original policy; leaving you to claim that sum back from your excess insurance broker.
You may be put off having to take out two separate policies, and perhaps having to make two claims, but if you’re on a budget it’s definitely worth it. Excess policies can be bought for as little as £25, and you’ll easily save the same amount, even by setting a voluntary excess fee as low as £200. Generally speaking, you’ll be able to set the payout amount on the excess policy. This is useful as it means you can match it to an existing policy you hold, and therefore won’t be paying over –the-odds, or you can adjust it to suit whatever excess fees you’re setting, if you’re taking out policies from scratch.
Who needs it?
Almost everyone can save from excess insurance. However, any group of people who are susceptible to paying more for their insurance are most likely to benefit. Excess car insurance is a handy way for younger drivers to get on the road cheaper, as well overseas drivers, and motorists who have a chequered claims history with car insurers. Being still in its infancy, you’ll likely find it difficult to get excess insurance from standard providers, but there are a growing number of specialist insurers now entering the market.
Don’t get caught out
A common mistake when making claims is differing names on the two policies in question. - If the name on the excess policy if yours, but you’re trying to claim against a home insurance policy in your partner’s name, your claim will likely be rejected. As with anything contractual, always take the time to read the term and conditions, and cross reference policies from different providers against each other.