When taking out car insurance, a crucial factor to consider is your excess. Excess plays a significant role in the event of a claim, so it’s important to understand how it works and the financial implications of setting and paying it.
You can learn all about what an excess is in car insurance right here with Savvy. Our informative guide covers what it is, how much it could cost and when you might need to pay it, as well as what the different types of excess are.
In Australia, the excess is an integral part of a car insurance policy. It refers to the amount of money a policyholder is required to pay towards a claim before the insurance company contributes the rest in a covered event.
Example: your car is in an accident and repairs come to $2,000. Your excess is $400, meaning you have to pay for the first $400 of the claim, after which your insurer can cover the remaining $1,600.
Paying an excess is a way to share the risk between the policyholder and the insurer. It also:
The circumstances in which you need to pay your car insurance excess can vary depending on the specific policy and the nature of the claim. Common situations include:
Your excess will be determined when you buy car insurance and will depend on several factors, such as the type of car insurance policy you have and your circumstances. The specific excess amount for your policy should be outlined in your insurance documents. Generally, higher excess amounts result in lower premium costs, while lower excess amounts may lead to higher premiums.
Different types of excess may also apply depending on the type of claim or specific conditions, so it’s essential to review your policy and understand the excess amount applicable to your coverage. For example, if the incident involves a young driver, you may have to pay an age excess on top of your standard excess amount.
In certain cases, depending on your car insurance policy, you may not be required to pay an excess. This could include:
When making a claim on your car insurance, you'll typically need to pay the excess before the claim can be finalised. However, the payment process may vary depending on your provider or type of claim. Generally, there are three ways an excess payment can be made:
The excess is usually paid as a lump sum, although you may be able to pay in instalments if your insurer agrees.
Deciding between a high or low excess depends on your personal circumstances and risk tolerance, so it’s important to weigh up the pros and cons to decide the best choice for you. Here’s a closer look at the implications of having a higher or lower excess:
This is the basic excess amount that can apply to all types of claims and is an essential component of most car insurance policies. It is a predetermined fixed amount set by the insurance provider, taking into account factors such as where you live, the type of vehicle you own and other risk considerations.
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