High Excess vs Low Excess: Which One’s Better?

Choosing between a high excess and a low excess is never easy. It’s up to you to identify the pros and cons and determine the amount of risk you’re willing to take. Consider these few factors to make the right decision.

What is an Excess?

First off, let’s understand what an excess really is. When it comes to car insurance policies, the excess is the amount you pay out of your pocket to cover the costs of damage, after which your car insurance company covers the rest of the amount.

It’s a way of you sharing some of the risk of an accident in order to reduce your payment today.

For instance, if you set your policies excess to $1000 and have a car accident that costs $3,000, you’ll need to pay $1000 out of pocket and your insurance company will cover the remaining $2000.

If you’re not at fault and the other party has caused the accident then you may not have any out of pocket at all.

Factors to Consider

Here are the top considerations to keep in mind when making your decision on excess…

Do you have an emergency fund?

You’ll need to consider the amount of money you can afford in case of an emergency before deciding on an excess amount. While a higher excess might save you some money, it’s not going to be beneficial if you do have to make a claim and can’t afford to pay it.

Do you drive a lot, increasing risk of an accident?

The more you drive the higher the chance that you may be involved in a collision, even if you do all of the right things and are considered a safe driver. If so, it may be better to opt for a lower excess. This way, you’ll pay less if you need to make a claim – although your premium will be higher in the short term.

These cars are topping up with a more eco and pocket friendly fuel. Approximate running costs of refuelling ones car compared to recharging are $1.50 per litre to run a fuel car versus $0.33 per litre for an electric car.

What level of risk are you comfortable with?

Generally, a higher excess is considered higher risk but it might save you money right now. If you’re an infrequent driver and mostly have your car safely stored then the level of risk may be low and the savings could be great. And on that note, here’s how to look after your car when not driving it.

What’s the value of your vehicle?

Your vehicle’s value can also impact your decision. If you drive a prestige or more expensive vehicle, it will cost more to have insured, so a high excess could help with affordability of insurance as your premium may be reduced significantly.

Are you financing or leasing your car?

If you’re financing or leasing your car (a novated lease is explained here, choosing a lower excess could work in your favour. This generally provides better coverage. Should your vehicle be irreparable you may be liable for the full cost owing to the finance or leasing company. A lower excess and the help of agreed value will make sure you’re not left with a massive out of pocket cost.

Have you shopped around for quotes?

Shopping around for quotes from different car insurance providers will allow you to get an idea of which policy has an excess that works best for you.  PD Insurance has a flexible excess option which will allow you to obtain a cheap car insurance policy with an excess that suits your needs.

Have you taken advantage of car insurance discounts?

If your goal is to save more money, there may be other ways to reduce your costs.  With PD Insurance you may be eligible for other car insurance discounts that will allow you to get the savings you need to keep your excess low. We have several on offer, such as a discount if you’re the only driver of your car.

Making a decision

Choosing a car insurance excess is entirely up to you. Some people feel comfortable with a lower excess while some others prefer the savings now that a higher excess can provide. Before you choose your excess read this.

And if after you’ve read that it all still sounds confusing, it’s perfectly alright. Car insurance can be a tricky area to understand, which is why we’re here to assist you. Start by getting a quote and we’ll be right there to help, or contact the PD Insurance team to learn more about how to make the right choice on excess for you.

Good luck!

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