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When you take out car insurance, one of the terms you’ll often come across is “excess.” It’s a key part of how your policy works, yet many drivers don’t fully understand what it means or how it impacts their premiums and claims. Let’s break it down clearly.
What Is Excess?
Excess is the amount of money you, as the policyholder, agree to pay out of your own pocket when making a claim before your insurer covers the rest.
Think of it as a way to share the risk between you and your insurer. For example:
- If your excess is R3,000 and the repair cost after an accident is R20,000, you will pay R3,000, and the insurer will pay the remaining R17,000.
Types of Excess
- Standard (Compulsory) Excess
- This is set by the insurer and applies to all policyholders.
- It cannot be removed and forms part of your policy terms.
- Voluntary Excess
- This is an additional amount you choose to pay on top of the compulsory excess.
- Opting for a higher voluntary excess usually lowers your monthly premium, as you’re agreeing to take on more risk.
- Additional/Conditional Excess
- Some situations may trigger extra excess. For example:
- Young or inexperienced drivers.
- Claims made within the first few months of your policy.
- Accidents occurring late at night.
- Some situations may trigger extra excess. For example:
Why Do Insurers Charge Excess?
Excess serves two main purposes:
- Discourages minor claims: It prevents people from claiming for every small scratch or dent, which helps keep premiums affordable for everyone.
- Shares responsibility: It ensures policyholders carry a portion of the risk, encouraging safer driving and accountability.
How Excess Affects Your Premiums
- Higher excess = lower premiums: If you agree to pay more out-of-pocket in case of a claim, insurers reward you with cheaper monthly payments.
- Lower excess = higher premiums: If you want minimal cost at claim stage, you’ll pay more each month.
It’s all about finding the balance that works best for your budget and risk tolerance.
When Do You Pay Excess?
You’ll need to pay your excess whenever you claim, regardless of who was at fault, unless:
- The insurer recovers the full cost from a third party.
- Your policy specifically waives excess under certain conditions.
Tips for Managing Excess
- Know your policy details: Check the schedule for all types of excesses that might apply.
- Set aside savings: Keep a small emergency fund to cover potential excess payments.
- Compare options: Insurers differ in how they structure excess, so it pays to shop around.
Final Word
Understanding excess is crucial for making smart insurance decisions. It directly affects your premiums, your claims, and your out-of-pocket costs. When shopping around, always weigh the trade-off between excess and monthly premiums to avoid surprises later.
If you’re looking to tailor your cover to your budget and lifestyle, it’s a good idea to compare car insurance quotes online. Brands like Pineapple Insurance make it easy to see how different excess options can affect your monthly premium and claims experience.
