Understanding Your Car Insurance Excess Payment


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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? How does an excess affect your insurance premiums?

It can be confusing to understand insurance terms, especially if you’ve never made a claim before. Don’t stress, we’ve got you covered.

Here’s all the info you need to know plus some frequently asked questions, answered.

woman stands at her broken down car. She may have to pay a car insurance excess for repairs

What’s an excess payment?

An excess payment is a fixed amount that you (usually) have to pay the insurance company when making a car insurance 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 $2,500 and your excess is $500, then you pay the $500 and the insurer pays the remaining $2,000.

While an excess is a compulsory feature of most comprehensive car insurance and third party 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 in our online portal.

Someone looking at car insurance on their phone. They may have to pay a car insurance excess for repairs

Types of insurance excesses

Some 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 the standard excess for policyholders and drivers who fall into certain age categories, e.g. under 21, or between 21 and 25. Check out our article Car Insurance For Young Drivers: Why Is It More Expensive?’ for more info.
  • Inexperienced Driver: similar to an age excess, some insurers impose an additional excess if an inexperienced driver drives your car. Check your product disclosure statement to see how your insurer defines inexperienced drivers.
  • Unlisted Driver: some insurance providers charge an excess if the person driving your car when it’s in an incident is not listed on your policy. Read: An Unlisted Driver Crashed My Car: What to Expect.

You might also be interested in finding out which car insurance myths are true and which are false.

Why is my excess high?

As mentioned earlier, you can adjust your standard car insurance 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. Read up on how to choose your excess.

Choosing your standard car insurance excess means you can decide what amount you’re comfortable paying if you have to make a claim. In some circumstances, such as if your car is written off, you may not have to pay the excess upfront as the insurer can deduct it from the final settlement amount they pay out to you.

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

Car and pen on car insurance excess documents.

How do I decide on a high or low excess?

So how do you decide on choosing a higher premium with a lower excess, or a lower premium with a higher excess? It all depends on several factors, including your personal circumstances and financial situation. Here are some things to consider:

Ability to pay

When choosing your excess, ask yourself whether you think you could afford to pay that amount out of pocket in the event of an accident. Is it worthwhile increasing your excess to lower your premium? That’s the educated guess you need to make.

Driving habits

Are you a careful driver with a good record? If so, you may choose to opt for a higher excess to reduce your premiums. On the other hand, if you’re a higher-risk driver, you may want to choose a lower excess to reduce your financial exposure in the event of an accident. Remember, car accidents can happen whether you’re a careful driver or not.

Claim history

If you have a history of making frequent claims, you may go with a higher excess to reduce your premium. Or, your history may convince you to go the other way!

Car model over a lot of money stacked coins on white background. You may have to pay car insurance excess

Can I claim insurance excess on tax?

In Australia, you can’t claim the insurance excess as a tax deduction. It’s considered a personal expense and not tax-deductible.

However, if you use your car for business purposes, you may be able to claim a deduction for the car insurance premium as a business expense. This would depend on the specifics of your situation and the extent to which you use your car for work. Chat with a tax professional to guide you and read our Claiming Car Expenses on Your Tax Return article.

Value-rich car insurance

At PD Insurance we care about our customers and want to build lasting relationships built on trust. When you take out a PD policy you’re joining community and family.

Read all about our different car insurance plans to decide which one suits you, your car and your pocket. For example, our comprehensive car insurance offers you the broadest cover at an affordable price. With comprehensive, if your car is damaged or stolen in a claimable event PD Insurance will cover replacement or repair. Ditto if you get into a legal quandary because you accidentally damage someone else or their property.

And the benefits don’t stop there. Why wait a moment more; click below to get your quote.

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