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

What is excess in car insurance, exactly? Should it be high or low? And why? It’s one of those things you can tweak with your car insurance and change the premium. So it’s something you should have a good think about. It’s true that when you’re talking excess you’re talking about potential future spend so it can be a challenge to imagine what will suit you best.

Like many things, high or low could work better for your bank account. So, take your time before making the decision.

It really depends on your lifestyle factors, like how and where you drive and what you’re willing to spend on car insurance over time versus your contribution when (if!) you claim. Choosing between a high excess and a low excess can actually be easy because there’s no wrong answer. On the flipside, that can make the choice difficult.

It’s just about regulating your spend to suit your pocket, now and in the future. Have a look.

What is excess in car insurance?

Let’s start at the beginning – by answering what exactly a car insurance excess is.

Think of it this way first; you and your car insurance provider are a team. Together you take care of your car’s best interests and the finances that you contribute towards this. When you’re insured, you pay just a little each month for your policy or an annual premium.

Then if you have an accident or your car gets stolen, vandalised or damaged in a hailstorm, for example, and you need to pay big mula to repair it or replace it, your policy helps carry the load.

When it comes to car insurance policies, the car insurance excess payment is a pre-determined amount you pay out of your pocket to help cover the costs of damage. After that, your insurance company covers the rest of the amount for repair or replacement.

The excess is a way of you sharing some of the risk of an accident to reduce your payment today. Makes sense, since you and your insurance provider are a team.

Paying your excess when you claim

When it comes to dollars and cents, what would an example of paying an excess actually look like? Let’s say your excess on your policy is set at $700. You have a car accident (oh no!) and on top of the pain and agony of your stiff neck there’s also the bill to fix your car.

Let’s say this comes to $8,000. Since your excess is set at $700, that’s your contribution to pay, while we – your insurance provider – will pay the balance of $7,300. That would certainly help ease the pain in your neck and your wallet somewhat. Moreover, your car will be back on track soon after and you can still go to work or drive your kids to school and more.

Is it better to have high or low excess?

Now that you know all about what excess is in car insurance, let’s take a look at the point where you choose your excess. Is it better to have high or low excess? As mentioned, you can choose either, and your choice depends on what your budget and driving habits look like now and what you anticipate down the line.

Choosing between a high or low excess in car insurance is part of a puzzle with moving parts. If you pay more now, you can pay less later and vice versa. Here’s what this means…

Should I take a higher excess or higher premium?

Is it better to have a high or low excess? Remember, your excess and your monthly premium are interlinked. If you want to pay a lower excess then you will pay more towards your monthly premium.

On the other hand if you need to lower your car insurance premium then you might look at opting for a higher excess (remembering this comes into play if you have an incident that you claim on). It’s all about balancing your bank account with your cash flow. This decision needs to suit your income and your spending for your current and future self.

Some people prefer the month-on-month/annual savings that a higher excess can provide. Other people feel comfortable with a lower excess because of the added safety and cushioning it provides in the case of a car-related incident.

Questions to ask

Here are a few key considerations to help you decide whether you want a lower excess or a lower premium.

⭐ 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 (in time, in length and in higher traffic areas) the greater the chance you’ll be involved in a collision. Even if you do all of the right things and are considered a safe driver accidents can happen. If you’re on the road a lot, 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.

A claimable incident doesn’t have to be a collision. When it comes to your car insurance and your payable excess it’s worth keeping in mind that accidents take many forms. It could be hailstones denting your passenger door, or someone trying to steal your car and damaging it, to name a few possible situations.

⭐ 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 lower. 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 insure it. A high excess could help with affordability of insurance as your premium may be reduced significantly. So, how much is your car worth? The number should inform your decision to some degree.

⭐ Are you financing or leasing your car?

If you’re financing or leasing your car (a novated lease is explained here, and financing a business vehicle here) choosing a lower excess could work in your favour.

Why? 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 that will allow you to obtain an affordable car insurance policy with an excess that suits your needs.

We also offer an excess buster. If you get excess buster car insurance then once every year or cover period we will pay your standard excess when you claim.

⭐ Have you taken advantage of car insurance discounts?

If your goal is to save more money, there may be other ways to lower your car insurance premium. You may be eligible for a range of car insurance discounts that will allow you to get the savings you need to keep your excess low.

An insurance provider may give you one if you’re a first time customer, the only driver of your car, insure more than one car, pay your premiums annually and more.

Do I pay excess if I am not at fault?

Do you always have to pay an excess on a claim? Even if you didn’t cause a car accident? While the excess is a standard part of an insurance policy, if the other driver causes the incident you’re involved in the onus generally falls to them to pay the excess.

For argument’s sake we’ll say they drove into the back of your car AKA no safe following distance…

In such a case, given that your slate is clean you likely won’t need to pay the excess. However, while the other driver is at-fault, if they can’t be located or don’t have insurance then this responsibility may fall to you.

If you’re involved in an incident, it’s important to take the other driver’s details. If the other driver’s at-fault, then you’ll submit their name, address, phone number and registration number with your claim. To make sure you take the right steps, read about what to do after an accident. Also read about whether insurance pays if an accident is your fault.

As for when your car is stolen, vandalised or damaged in a weather event, you do need to pay the excess. When no one is at-fault the responsibility comes back to you, the car owner.

And if you are at fault in a car accident then you absolutely need to pay your excess.

Why is excess important in insurance?

Excess in insurance is important because it helps keep insurance affordable and accessible in general, i.e. for the insured collective. Your policy is your agreement with your insurer that helps keep your car and related finances protected. And as we mentioned earlier, you and your insurance provider achieve this together as a team.

While your insurer is there to cushion the blow, the excess is your contribution to sharing the loss. That’s why it’s important. Each party plays an essential role that creates a super soft landing for you, in the event of any car incident.

Choose award winning car insurance

Not only is choosing a high or low car insurance excess entirely up to you but you also have a choice of car insurance cover. Read about different types of car insurance to see what win-win policy is best for your pocket and driving lifestyle.

Then click below to get a quote on award winning car insurance.