Understanding Your Car Insurance Excess Payment

You’ve heard of an ‘excess payment’ when reading up on comprehensive car insurance – an exciting read for anyone, right? But what does it really mean and why are you paying it? Should you choose a high excess or a low one – what’s the benefit each way?

It can be confusing to understand insurance terms, especially if you have never made a claim before. Don’t stress, we’ve got you covered! Here’s a little info about excesses.

What Is An Excess Payment?

An excess payment is a fixed amount that you have to pay when making a claim. Think of it as a type of deposit you contribute to the cost of getting your car repaired, and your insurer will pay the remaining amount.

For example, if the cost to repair damage to your car comes to $2500 and your excess is $500 then you pay the $500 and the insurer pays the remaining $2000.

While an excess is a compulsory feature of most comprehensive car insurance policies, at the time of taking out that insurance you decide whether to pay a higher premium to reduce your excess or vice versa. So, you can choose the standard excess amount you would have to pay if you were to make a claim (within certain limits determined by the insurer).

Not sure what your standard excess is? You can find it on your current insurance certificate (if you’re a PD Insurance customer, you can get yours via your account online).

Types Of Insurance Excesses

Some comprehensive car insurance products have more than one type of excess. Here’s a brief description of the most common types:

  • Standard: the out-of-pocket amount you have to pay when making a claim. You choose this amount when you take out your policy.
  • Age: in some cases, additional fees are placed atop standard excess for policyholders and drivers who fall into certain age categories, e.g. under 21, or between 21 and 25.
  • Inexperienced Driver: similar to an age excess, some insurers impose an additional excess if your car is driven by an inexperienced driver. Check your product disclosure statement to see how your insurer defines inexperienced drivers.

Why Is My Excess High?

You can adjust your standard excess within the range allowed by your insurer. Just remember, standard excess values and your insurance premium have an inverse relationship – the higher excess, the lower the premium and vice versa.

See here for more information on choosing between a high and low excess.

Choosing your standard excess means you can decide what amount you are comfortable paying if you have to make a claim.

In some circumstances, i.e. if your car is written off, you may not need to pay upfront because the insurer can deduct the excess from the final settlement amount paid out to you.

Is your policy up for renewal soon? Check out our tips to saving on your premium.

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