CAR INSURANCE EXCESS EXPLAINED

When we hear the word excess, we immediately think of its dictionary definition: too much. Excess suggests taking more than we need or a quantity greater than what is absolutely necessary for our needs. For example, that one extra trip to the salad bar that inevitably leads to the waste of an expensive steak dinner, in favour of a handful of croutons.

However, in terms of car insurance, excess is the complete opposite of this – in the long run, it means getting a less comprehensive insurance policy in exchange for a smaller premium!

In simple terms, your excess is an agreed amount between you and your car insurance provider that you will pay out of your own pocket for repairs to your car in the event of an accident. The advantage to this is that your premium will be lower so your regular insurance payments will be less. However, this does mean that you will be expected to pay the agreed amount in repairs if your vehicle is damaged, so it could mean that you will have to immediately fork out cash for urgent repairs if you make a claim on your policy after an accident.

Sometimes in Australia, paying some excess is compulsory after you make a claim on third party property insurance or comprehensive insurance. For example, if you are responsible for a serious accident where your car is damaged beyond repair, your insurer would put some money towards your new car after who have contributed the minimum compulsory excess which has been determined by your insurance provider. This is why you should be careful not to make too many claims on minor damages to your car, because the cost of repairing them yourself could be less than the excess you are required to pay and it could even affect your premiums in the future, as you may be seen as more of a risk by your insurance provider.

However, it’s not all doom and gloom. A lot of Australians ask for greater excess from their insurance providers because although they will be left with a larger bill in the event of an accident, their regular insurance payments decrease significantly.

A lot of the time, careful drivers can have a high excess and a low premium and may never even get into an accident, meaning that the risk pays off. For young drivers, this is very good news as their policies are generally very expensive. Asking for more excess can make owning a car an accessible possibility for many young Australians who wouldn’t be able to afford the insurance otherwise.

Ultimately, it is up to you as an individual on how much excess you ask for. It’s important to remember that having greater excess poses a greater risk on you should you be involved in an accident. Big savings are there for the taking if you can pluck up the courage to ask for that little bit extra of excess.

It’s important to remember the value of careful, safe driving because regardless of how much excess you have, good driving is undoubtedly the most effective way of saving money!