Car Insurance Excess - How does it Work and what are the Different Types?

When you take out car insurance, one of the aspects you need to be aware of is what excess (a term used in the insurance industry) amounts are applicable on the policy.

What is the Excess?

Car Vehicle Excess is the amount that you will have to pay from your own pocket in the event of a claim, for example: If your excess on a claim for a broken windscreen is R250 and the total claim is for R400, you will have to pay the first R250 and the insurance company will pay the difference of R150.

The amount of excess can depend on many factors such as the make of your car and who the driver was at the time of the accident, should the claim result from an accident. Young drivers carry a higher excess as the statistics has proven them to be a higher risk.

You will normally also find different rates applicable for different categories of claims, i.e. you may have to pay a 5% excess on a theft claim but 15% on accidental claims.

Calculate your Excess Before you Claim

If the excess is more than the total amount of your claim, or even a large portion of it, it will not be in your interest to make the claim. Should you earn a no-claim bonus on your policy, claiming a few hundred rand, where your bonus may be worth thousands, will not be in your best interest. Remember that you loose your no claim bonus as soon as you claim. A no-claim bonus is paid to you after a laid down period during which you had no claims. It could be a lump sum payout or a reduction in future premiums.

Who receives the excess?

If your car is a write off, the excess will be deducted by the company before paying the balance of the claim to you. In the case of repairs you will pay the excess to the approved garage.

Should your car be damaged and a third party’s insurer accepts responsibility you can claim the excess you have paid back from the third party’s insurer.

Types of excess

Standard excess: The standard or compulsory excess is the amount you will be responsible for should you claim. It is specified in your policy, for example on window glass the excess may not be the same as for other damage. The term “first amount payable” is also used by insurance companies.

Additional excess: This amount will be payable over and above the standard excess, if applicable. As an example: The policy might specify that, should the driver be younger than 25 years of age, an additional excess will apply to all or certain claims.

Voluntary excess: Your insurance company may give you the choice of voluntary excess. In such a scenario you will be accept responsibility for a higher excess in exchange for lower monthly premiums. Remember, the voluntary excess is over and above the Standard and Additional excess amounts (should there be an additional amount involved in the claim.) Nowadays you can even take out a separate policy to cover a set percentage of your excess amounts. This should not be necessary for your private vehicle but could become a consideration if you have a fleet of vehicles.