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Guide to excess insurance

All insurance policies (with the exception of Life Insurance) have some form of policy excess, where you have to contribute a monetary value when making a claim. This is to deter people from making unnecessary claims, and in effect encourages people to be more responsible and reduce the potential of having to make a claim in the first place. There are two types of policy excess; compulsory excess (a fixed sum that you must pay when making a claim), and voluntary exccess (an amount that you agree to pay when making a claim). This therefore means that you can end up paying the sum of the two, which can be significant. Excess insurance is a supplemental policy, which allows you to cover your policy excess responsibility and claim back any payments that you have to make as a result of a claim. Excess insurance can also pay for itself. Learn how excess insurance could pay for itself .

To explore excess insurance in more depth we have put together a more detailed guide which uses motor excess insurance as the prime example. If you have any queries about Excess Insurance in terms of other types of standard insurance please do not hesitate to get in touch.

What is policy excess?

A policy excess is an amount of money your insurer requires you to contribute towards the cost of making a claim on your policy. This excess will be either ‘compulsory’ or ‘compulsory and voluntary’. With compulsory excess you have to pay the amount required by the insurance company. The amount you need to pay will be based on lots of different factors including previous claims, the type of claim, your car, your age and the amount of time you have been driving. This is the part of insurance you can't control. However, what you do have control over any voluntary excess. You can opt to add voluntary excess on top of the compulsory amount when you set up your cover.

What is motor excess insurance?

Having a full understanding of policy excess makes it much easier to get your head around what excess insurance is and how it works. This supplemental policy runs alongside your standard car insurance policy and covers you for the excess you have to pay on your standard insurance should you need to make a claim. The amount you are covered for on your excess insurance is pre-agreed and most of the policies last for a year, the same amount of time as your standard car insurance policy. Depending on your needs, you can get excess insurance for partial cover of the excess you need to pay, or you can opt for the highest amount of excess you will need to pay, which is usually between £150 and £800 depending on your personal circumstances. So if your total excess is £500 compulsory and voluntary combined, you can take out excess insurance to cover the costs up to this amount.

How does it work if I do need to make a claim?

Basically you need to make two claims. You make a claim on your standard insurance and pay your excess up front, then you make a claim on your excess insurance policy to get your excess back. For the time is takes to make two claims, as well as getting your money back, you can also achieve huge overall savings on your premium.

How does excess insurance differ from standard insurance?

First and foremost, you are legally required by UK law to have standard car insurance in order to legally drive your vehicle. Excess insurance is not a legal requirement and does not in any way replace standard car insurance. Standard car insurance is a detailed policy providing you with cover for accidents, theft, malicious damage etc. Excess insurance ONLY covers you for the policy excess.

What does excess insurance cover?

Excess insurance covers the policy excess you have to pay to your standard car insurance provider. You will still need that excess available (in your bank account) to pay your standard insurance company before you can then make a claim on your excess insurance.

Exclusions on an ExcessFree Motor Excess policy include:

  • The excess on your standard car insurance policy is not exceeded
  • You do not hold a valid driving license
  • Minor claims like glass damage, key and windscreen
  • Claims where the excess can be claims from the third party
  • The car being used on a race track, or other prepared course

For full exclusion details check your policy wording document.

How do I benefit from excess insurance?

The main benefit to having excess insurance is the savings. You will not only save money when you make a claim on your insurance and get your excess back with your excess insurance, but you could also see your premiums lowered if you have opted for a higher voluntary excess on your standard insurance policy.

Will I still need to pay my excess?

You will still need to pay your policy excess and have the money available to do so. However, you will get that money back via your excess insurance policy as long as the claim does not come under any exclusions, which can be found in your policy documentation.

Is excess insurance trustworthy?

In a world where scam sites or imposter sites do exist, it is imperative to select a company that is FCA (Financial Conduct Authority) regulated. The FCA regulate more than 70,000 businesses ensuring that they meet prudential standards. ExcessFree is one such company, meaning they offer a bonafide service that is there when you need them, in order to reclaim your policy excess payments. For more details on the FCA please visit  http://www.fca.org.uk/.

Will it really save me money?

In regards to long term savings, there's a lot to be made. With money being tight for most people, selecting the higher excess option on your car insurance is a very simple way to take your premiums down, instantly saving you money. However, by doing this you are also committing to paying that higher excess price and will need it available to you should you make a claim. By getting excess insurance you will get that higher excess cost back after you have made a claim on your standard insurance and then on your excess insurance. So the main savings you will make will be on your main insurance premiums because you're opting for a higher excess.

Here's an example:

Mr Smith gets his comprehensive car insurance cover from Best Deal Car Insurance and opts to pay the minimum excess of £200. Mr Smith unfortunately has an accident in his car and finds he has to make a claim with Best Deal Car Insurance. Mr Smith not only has to pay £200 excess but also finds his premiums are higher after making this claim.

After finding out he could get lower premiums by opting for a higher excess, the next time Mr Smith insures his car he goes to Best Deal Car Insurance and opts for comprehensive cover with £300 compulsory excess and £300 voluntary.This makes his policy excess responsibility £600 in total. As a result of him opting for higher excess, his premiums with Best Deal Car Insurance reduce in price.

As Mr Smith wanted to make sure he wasn't left out of pocket should he need to make a claim in future, he opted to get Motor Excess Insurance from ExcessFree on top of his comprehensive car insurance.

ExcessFree covered him for the full £600 excess so Mr Smith could rest assured in the meantime, his insurance premiums with Best Deal Car Insurance were less and should he need to make a claim, he would have to pay £600 up front to Best Deal Car Insurance, but after making a claim on his excess insurance, ExcessFree would swiftly reimburse him the £600.

If Mr Smith was to unfortunately have another accident, he would simply make a claim with Best Deal Car Insurance, pay the £600 excess again and then make a further claim with ExcessFree for the £600 so he wouldn't be out of pocket at all. He could repeatedly claim up to his specified policy cap limit.

Could excess insurance be right for you?

Lots of people haven't heard of excess insurance, and yet it saves people money every single day. If you think higher excess could lower your car insurance premium, and you want to make sure you're covered for that higher excess, consider excess insurance, it could help you make some pretty huge savings.

Take a look at ExcessFree's excess insurance policies.

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