Car insurance excess is an out-of-pocket expense you need to pay if you make a claim. 

Your excess amount can impact your premium, and you can potentially save on your policy by choosing an additional amount called a ‘voluntary excess’. Here’s how it works.

Key Points

  • A car insurance excess is an amount you need to pay if you ever make a claim on your policy. 

  • A voluntary excess is an additional amount you can agree to pay on top of your standard excess to get a cheaper premium.

  • Choosing the right excess all comes down to what’s suitable for your financial circumstances.

  • Comparing excesses, premiums and coverage across multiple insurers can help you figure out which policy offers the best value in your situation.

Overview

No matter how great a driver you are, things like accidents, damage and theft unfortunately happen.

Having car insurance is one way to help avoid paying a big repair or replacement bill if something goes wrong.

But while you can protect yourself against being hit with major costs, if you ever make a claim on your car insurance policy, you’ll probably still have to pay an out-of-pocket amount called an ‘excess’.

The amount you choose for your excess can affect your premium. Generally, the higher your excess, the cheaper your premium. On top of that, you could potentially save more by opting into an additional ‘voluntary excess’.

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There’s no right or wrong way to go about excesses. It all comes down to your situation and whether it’s more important to you to save money on your premium or reduce your out-of-pocket costs if you ever need to make a claim.

This guide covers the ins and outs of excesses to help you decide.

What is a car insurance excess?

A car insurance excess is an amount you need to pay if you ever make a claim on your policy. 

For example, if your policy has a $1,000 excess and you made a claim for $4,000 worth of damage to your car, you’d foot the bill for $1,000 of the repair costs and your insurer would pay the remaining $3,000.

Excesses can differ from insurer to insurer and policy to policy.

In most cases, you can choose to increase or lower your excess on your car insurance policy. Raising your excess will typically lower your premium, whereas reducing your excess will increase it.

Some insurers apply an additional excess to certain types of drivers, like those aged under 25 or people who have recently had their licence cancelled, suspended, disqualified or restricted.

You might also not have to pay an excess at all, for example if you’re in an accident where you’re not at fault.

Are there different types of car insurance excess?

Yes, there are different types of excess, including:

Standard excess

This is the base amount you will need to pay when making a car insurance claim. The standard excess generally applies to all claims for that policy, unless there are exceptions listed in the Product Disclosure Statement (PDS).

Voluntary excess

A voluntary excess is an additional, optional amount you can agree to pay on top of your standard excess, usually in exchange for a cheaper premium.

Age excess

An age excess is an additional excess that usually applies to drivers under the age of 25. 

Even if the age excess doesn’t apply to you (the policyholder), you will generally still need to pay it if someone under the age of 25 has an accident while driving your car.

Inexperienced driver excess

Similar to the age excess, the inexperienced driver excess is an additional amount on top of the standard excess. This generally applies to drivers over the age of 25 who’ve had a driver's licence for less than two years.

Driver history excess

This excess typically applies to drivers who have had their licence cancelled, suspended, disqualified or restricted in the three years before the policy start date.

Insurers can call excesses different things and have different rules for when they apply and when they don’t. This can make it tricky to know what you’ll actually need to pay if you ever make a claim.

Our team of experts walk you through the different excesses across different insurers to make sure you know where you stand. They can help you get a good deal on your policy as well.

What is voluntary excess in car insurance?

A voluntary excess is an additional amount you can agree to pay on top of your standard excess.

One of the big reasons you might agree to a voluntary excess is to get a cheaper car insurance premium.

Generally speaking, the more you’re willing to pay out of pocket when you make a claim, the lower your premium will be.

If you don’t mind paying a bit extra should you ever have to make a claim, choosing a voluntary excess could be a good way to reduce your premium.

On the other hand, if a bigger lump sum is the last thing you want to think about after an accident, you might choose to stick with a lower excess. It all depends on what’s right for your financial situation.

Can I reduce my excess?

Yes, most insurers will give you the option to reduce your excess. Keep in mind that this usually means paying a higher insurance premium.

If additional excesses like an age excess or inexperienced driver excess apply to you, you probably won’t be able to reduce or avoid these.

What you can do is compare coverage, premiums, and excesses across multiple insurers to see which one works out to be the best value for your circumstances. 

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Disclaimers:

This guide is opinion only and should not be taken as financial advice. Check with a financial professional before making any decisions.

GENERAL ADVICE WARNING: General Advice is advice that has been prepared without considering your current objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of the advice having regard to those objectives, situation or needs.

If the advice provided relates to the acquisition or possible acquisition of a new insurance policy you should consider the insurers PDS prior to making the decision to purchase their product.  Information regarding the income we have been paid by the insurer for this transaction is available upon request.