Should I increase my excess?

Editorial team Published on

Increasing your insurance excess (deductible) lowers your regular premium, but it means you pay more out of pocket if you file a claim.

✅ When to Increase Your Excess

  • You have emergency savings: You can easily pay the higher amount right away without stress.
  • You rarely make claims: Your driving or claim history is clean, and you want to lower yearly costs.
  • The premium savings are high: The drop in your annual bill is much larger than the extra risk you take on.

⚠️ When to Keep a Low Excess

  • You have no savings: A sudden unexpected bill would cause major financial trouble.
  • You drive in high-risk areas: Your chance of an accident or damage is higher due to heavy traffic or frequent travel.
  • The discount is small: Saving a tiny amount on your yearly premium is not worth a huge jump in your claim cost.

💡 How to Decide

  • Compare the yearly premium savings against the new total excess amount.
  • Calculate how many years of premium savings it takes to equal your higher deductible payout.
  • Only raise the excess if that math makes sense and you keep that cash ready in a bank account.

Is a higher excess worth it?

Choosing a higher excess lowers your regular insurance premium, but it increases the amount you must pay out of pocket if you make a claim.

Whether a higher excess is better depends on your budget, savings, and comfort with financial risk.

How Excess Works

  • Compulsory excess: The set minimum amount your insurer requires. You cannot change this.
  • Voluntary excess: An optional amount you choose to add on top of the compulsory excess.
  • Total excess: The combination of both amounts. This is the total cash you must pay before your insurance starts covering a claim.

Pros of a Higher Excess

  • Cheaper monthly or annual premiums: Insurers charge less for coverage because you take on a bigger share of the financial risk.
  • Savings on fixed costs: If you are a careful driver or confident you won't need to claim, you keep more money in your pocket day-to-day.

Cons of a Higher Excess

  • High upfront costs during a claim: If an accident or incident happens, you must pay the total excess lump sum before repairs or payouts begin.
  • Small claims become pointless: If the cost to fix a minor dent or scratch is lower than your total excess, you have to pay for the repair entirely yourself.
  • Diminishing returns: Raising your voluntary excess past a certain point (such as £500) often stops reducing the premium by very much, meaning you take on extra risk for little reward.

Which should you choose?

  • A higher excess is better if: You have emergency savings to cover the total amount in an accident, and the discount on your insurance policy makes the added risk worthwhile.
  • A lower excess is better if: You cannot afford a sudden large bill and prefer predictable, stable monthly expenses over the risk of a high one-off payment.

You can compare quotes on platforms like MoneyHelper or MoneySuperMarket to see how adjusting your voluntary excess changes your overall price.

Is it worth increasing voluntary excess?

Increasing your voluntary excess generally lowers your annual insurance premium, but it is only worth doing if the savings outweigh the higher out-of-pocket cost you must pay when making a claim.

How Voluntary Excess Works

  • Definition: Voluntary excess is the extra amount you agree to pay toward a claim, added on top of your insurer's fixed compulsory excess.
  • Lower Premiums: Agreeing to pay more toward a claim reduces the insurer's risk, which usually lowers your upfront policy cost.
  • Diminishing Returns: Savings on your premium flatten out past a certain point (often around £250 to £500), meaning higher amounts stop offering significant extra discounts.

When It Is Worth It

  • You have emergency savings: You can comfortably afford to pay the combined compulsory and voluntary excess immediately if an accident or damage occurs.
  • You rarely claim: You are a safe driver or low-risk policyholder who does not expect to file minor claims.
  • The math checks out: The reduction in your annual premium is large enough compared to the jump in your risk exposure.

When It Is Not Worth It

  • Tight budget: You cannot comfortably afford a large cash outlay during an emergency or a stressful situation.
  • Small claims become pointless: If a repair costs less than your total excess, your insurer will pay nothing, meaning you cover the whole repair yourself.
  • Diminishing savings: Raising the excess higher yields negligible premium reductions while drastically increasing your personal financial risk.

Is it better to have low or high excess?

Whether a low or high excess is better depends on your budget, driving habits, and ability to pay out-of-pocket during an emergency. An excess is the amount of money you agree to pay toward an insurance claim before your provider covers the rest.

High Excess

  • Lower payments: Your regular monthly or annual insurance premium costs less.
  • Best for safe drivers: Ideal if you rarely make claims and want to save money on fixed costs.
  • Higher risk: You must pay a large amount of cash immediately if you get into an accident.

Low Excess

  • Higher payments: Your regular insurance premium costs more each month or year.
  • Smaller claim costs: You pay very little out-of-pocket if your property gets damaged.
  • Best for tight budgets: Ideal if you cannot afford a sudden, large cash bill in an emergency.

What is a good excess to have on car insurance?

A good voluntary excess on car insurance is typically between £100 and £250, balancing lower monthly premiums with an affordable out-of-pocket cost if you need to claim.

📊 How Excess Works

Car insurance excess is split into two parts:

  • Compulsory excess: A fixed, non-negotiable amount set by your insurer based on your age, car type, and risk profile.
  • Voluntary excess: An optional amount you choose to add on top to lower your overall yearly or monthly premium.
  • Total excess: The combined sum of compulsory and voluntary excess that you must pay or that gets deducted from your claim payout.

💡 Choosing the Right Voluntary Excess Option

Since personal savings and risk tolerance dictate the ideal amount, here is a breakdown of common choices to help you decide:

  • ✅ Low Voluntary Excess (£0 - £100)
    • Best for: Drivers with limited emergency savings who prioritize predictable, smaller claim costs.
    • Trade-off: Results in higher overall monthly or annual insurance premiums.
    • Financial Impact: Safer for cash flow during an unexpected incident, but you pay more year-round.
  • 📌 Moderate Voluntary Excess (£200 - £250)
    • Best for: Most average drivers looking for the sweet spot of diminishing returns on premium savings.
    • Trade-off: Balanced reduction in yearly premiums without inflating claim costs too high.
    • Financial Impact: Offers a smart middle-ground where premium discounts are meaningful yet affordable.
  • ⚠️ High Voluntary Excess (£500+)
    • Best for: Experienced drivers with robust emergency funds and a high risk tolerance.
    • Trade-off: Significantly reduces your insurance premium, but makes small-to-moderate claims unaffordable or pointless to file.
    • Financial Impact: Saves money upfront, but risks high financial strain if an at-fault accident occurs.

🗓️ Strategic Rules of Thumb

  • Affordability First: Never set your voluntary excess higher than an amount you can comfortably pull from your savings tomorrow without relying on credit cards.
  • The Diminishing Returns Threshold: Pushing your voluntary excess past £250 or £300 often yields very minor extra premium savings compared to the large jump in your risk.
  • Check the Total: Always add your compulsory excess to your voluntary choice before deciding; a young driver with a £500 compulsory excess shouldn't add a high voluntary excess on top.

Reduce My Excess - What Are CDW and SLI?

9 related questions found

What does 100 excess mean in insurance?

A 100 excess means you agree to pay the first 100 units of currency (such as £100 or $100) of any valid insurance claim, while your insurance provider pays the remaining cost.

How It Works

  • Your Share: You pay the initial 100 directly.
  • The Insurer's Share: Your insurance company covers the rest of the bill up to your policy limit.
  • Example: If your home repairs or medical treatment cost 600 and your excess is 100, you pay 100 and the insurer pays 500.

Key Details

  • Small Claims: If a repair or cost is less than 100, there is no payout from the insurer because the entire cost falls below your excess.
  • Per Claim vs. Annual: Depending on your policy type (like car vs. health insurance), the 100 may apply to every single claim you make, or just once per policy year.
  • Total Excess: This 100 might be a compulsory amount set by the provider, or a voluntary amount you chose to lower your regular monthly or annual insurance price. Learn more about how policies handle these costs through MoneyHelper.

What does a $500 excess mean?

A $500 excess means you must pay the first $500 of any approved insurance claim out of your own pocket, and your insurer pays the rest.

How It Works

  • Your share: You pay the initial $500 directly for repairs or treatment.
  • The insurer's share: The insurance company covers the remaining costs above that $500 limit.
  • Example: If your car repairs cost $2,000, you pay $500 and the insurer pays $1,500.
  • Small claims: If an incident costs less than $500 to fix, you pay the whole bill yourself, meaning it is not worth making a claim.

Why Excess Matters

  • Lower monthly bills: Choosing a higher excess like $500 usually lowers your regular insurance premium because you take on more of the financial risk.
  • Compulsory vs. Voluntary: Your total $500 excess might be a mandatory amount set by the insurer, or a mix of a compulsory fee and an amount you volunteered to pay.

What should I put as my voluntary excess?

Choose a voluntary excess that balances a lower annual premium with an amount you can comfortably pay out-of-pocket if you need to make a claim.

How Voluntary Excess Works

  • Total Excess: Your total payout deduction is your compulsory excess (set by the insurer) plus your voluntary excess (chosen by you).
  • Premium Impact: Selecting a higher voluntary excess generally reduces your overall insurance quote, while a £0 voluntary excess keeps your upfront claim cost lower but raises your regular payments.
  • The "Sweet Spot": Many drivers aim for £250, as pushing it higher (like £500 or £700) often yields very small additional premium savings while vastly increasing your financial risk. A single user on Reddit suggests a strategy of raising the excess only until the point where further savings become smaller than the added risk.

Factors to Consider

  • Affordability: Always verify that your combined compulsory and voluntary excess is an amount you have readily available in savings.
  • Claim Likelihood: If you are a confident, safe driver with secure parking, a higher excess might save you money since you rarely claim.
  • Small Claims: Remember that if minor damage costs less than your total combined excess, you cannot claim it on your insurance anyway.
  • Compare different levels using quote engines like MoneySuperMarket to see how much changing your voluntary excess actually alters your specific price.

Do I pay my excess if I'm not at fault?

You may need to pay your excess upfront, but you will usually get it back if your insurer recovers the full cost from the at-fault driver.

How Excess Works in Non-Fault Accidents

  • Upfront payment: Many insurers require you to pay your policy excess (the compulsory and voluntary amounts combined) when you book repairs or process the claim, even if the crash was not your fault.
  • Liability investigation: Your insurer often asks for the payment while they investigate the accident and determine liability with the other driver's company.
  • Refunds: If the other driver's insurance accepts full liability and your insurer successfully recovers all costs, your excess should be refunded to you.
  • Waived excess: In some cases, if the other party immediately admits fault and liability is clear right away, your provider might waive the excess entirely so you pay nothing.
  • Alternatives: If you deal directly with the at-fault driver's insurance instead of your own, or if you have legal expenses cover, you may avoid paying an upfront excess altogether.

Most users on Reddit agree that if you have to pay the excess upfront in a no-fault accident, you must keep your receipts and track the recovery process closely with your provider.

What happens if I have an excess of 500 pounds on my car insurance?

An excess of £500 means you must pay the first £500 of any approved car insurance claim out of your own pocket.

How It Works During a Claim

  • Out-of-pocket cost: If you make a claim, you pay £500, and your insurer pays the remaining cost above that amount.
  • Payment method: You usually pay the £500 directly to the repair garage, or the insurer deducts £500 from your total cash settlement payout.
  • Small damages: If the damage to your car costs less than £500 to fix, you cannot claim the repair costs from your insurer because the bill is lower than your excess. You still need to report the incident if required by your policy.
  • Larger claims: If your repair bill is £2,000 and your excess is £500, your insurer pays £1,500 and you cover the remaining £500.

What Comprises Your £500 Excess

  • Compulsory excess: This is a fixed amount set by your provider based on your age, car type, and driving experience.
  • Voluntary excess: This is an extra amount you choose to add when buying your policy to lower your overall yearly or monthly premium. Your total excess is the sum of both numbers combined.