What Is Excess in Car Insurance?

Find out about car insurance excess and how it works in this useful guide.

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, updated on February 15th, 2024       

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Car Insurance Banner - Man sitting next to a car accident talking on the phone to an insurance company to make a claim.

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.

This informative guide covers what excess is, how much it could cost and when you might need to pay it, as well as what the different types of excess are.

What is a car insurance excess?

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:

  • Helps keep insurance premiums affordable by shifting a portion of the financial responsibility onto the policyholder, allowing insurers to provide cover at reasonable rates.
  • Helps discourage policyholders from making minor claims, such as for small scratches or dents, which can be more costly to process than the actual repair cost.
  • Gives policyholders an incentive to drive responsibly and take precautions to prevent accidents.

In what circumstances do I need to pay my car insurance excess?

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:

  • At-fault accidents: if you’re deemed at fault for an accident, whether a single-vehicle accident or one involving other parties, you’ll typically need to pay your excess when making a claim.
  • Theft or vandalism claims: if your vehicle has been stolen or intentionally damaged, you’ll generally need to pay the excess when filing a claim. This helps cover the cost of repairs or vehicle replacement.
  • Uninsured or unidentified drivers: if you’re involved in an accident where the other party is uninsured or unidentified, you may need to pay your excess when making a claim. Your insurer may try to recover the costs from the responsible party, but you’re initially responsible for the excess payment.
  • Storm, hail, fire and flood damage: some car insurance policies cover damage caused by storms, hailstones, fire and flooding, but you may still need to pay your excess when making a claim for repairs or vehicle replacement.
  • Animal collision: if your vehicle hits an animal, such as a kangaroo, you may need to pay your excess when filing a claim for the damages. Animal collisions can cause significant damage to your vehicle, and depending on your policy, you may be required to pay the excess.

How much will my excess cost?

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.

Are there situations where I don’t need to pay my excess?

In certain cases, depending on your car insurance policy, you may not be required to pay an excess. This could include:

  • Not-at-fault accidents: if you’re involved in an accident and determined to not be at fault, meaning another party is fully responsible, your insurance company may waive the excess. In these cases, the responsible party’s insurance should cover the costs of repairs or compensation.
  • No-excess policies: some insurance providers may offer policies with no excess, or additional coverage that waives the excess for particular claim types. These policies may come with higher premiums but mean you won't need to pay an excess in the event of certain claims.

How do I pay my excess when making a claim?

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:

  • Payment to the insurer: you pay the excess directly to your insurance company when you make a claim. This can usually be done through payment methods such as credit card, debit card or bank transfer as decided by your insurance provider.
  • Deducting excess from claim payout: your insurer may deduct the excess amount from the claim payout. This means that the excess will be subtracted from the total amount you’re eligible to receive as compensation for the damages or loss. The remaining balance after deducting the excess will be paid to you or your repairer.
  • Payment to the repairer: in certain situations, particularly when your vehicle needs repairs, you may be required to pay the excess directly to the appointed repairer. You'll generally need to pay the repairer before they commence repairs on your vehicle.

The excess is usually paid as a lump sum, although you may be able to pay in instalments if your insurer agrees.

Is it better to have a high or low excess?

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:

  • Lower premium, higher excess: opting for a higher excess means you’ll have a larger out-of-pocket payment in the event of a claim. However, it generally leads to lower insurance premiums, so it may be beneficial if you want to reduce your costs and are prepared to cover a higher excess if an incident occurs.
  • Higher premium, lower excess: a low excess means a smaller out-of-pocket payment when filing a claim. However, it typically results in higher insurance premiums. If you think you may have to make more frequent claims or want the peace of mind of a lower upfront cost, you may decide to opt for a lower excess if you have the option.

What are the different types of car insurance excess?

Frequently asked questions about car insurance excess

Is the excess a one-time payment or per claim?

The excess is typically applied on a per-claim basis, meaning it applies to each separate incident that you claim for. If you have multiple claims in a policy period, you may need to pay the excess for each claim.

What happens if the cost of repairs is lower than my excess?

If the cost of repairs to your vehicle is lower than your excess when you make a claim, you may be refunded the difference. Alternatively, you may choose to cover the cost yourself out of pocket rather than submitting a claim, which would allow you to keep your no-claim bonus.

Can I change my insurance excess mid-policy?

You should be able to change your excess when your policy is up for renewal, while some insurance providers may allow excess amounts to be adjusted during the policy term. However, this may come with conditions, so it’s important to check with your insurer to understand their policy.

What if I can’t afford to pay my car insurance excess?

If you're unable to pay your excess costs upfront due to financial hardship, you should contact your insurer to discuss your situation. They may agree to let you pay in instalments or give you longer to pay the excess. You could also ask for the excess to be deducted from any payout you may receive.

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