Out of the several things you need to decide on while purchasing a vehicle insurance policy, the excess is one of them. We will tell you what it means if you are a vehicle owner looking to buy the best car insurance for the first time and are not entirely familiar with this term. Excess is a specific percentage of vehicle insurance coverage that a policyholder agrees to pay when filing an insurance claim.
A policyholder may benefit by choosing a higher excess as it can help lower the premiums for car insurance in NSW. On the flipside, they may benefit with a lower excess (which means a higher premium) if their car drives into a claims situation. They will have less to pay.
However, the fact is most people don’t claim on their car insurance every year. They may rarely claim in times such as when their vehicle meets with a gruesome accident or is stolen due to a theft activity. We advise vehicle owners to bear this in mind and consider their financial wellbeing before choosing an excess that most likely suits their vehicle’s needs.
How does excess play a crucial role in my car insurance policy?
Usually, the insurance provider asks the policyholder to set a specific amount as excess when buying a policy. Then, the insurer expects you to pay the excess when making an insurance claim.
For instance, when you are at fault in a road accident, you will be liable to cover the vehicle/property damage costs for the people who suffered losses because of the accident. In such a case, there are two courses of action which an insurer can take –
Course 1: Your insurance provider may pay you only the claim settlement amount if the costs exceed the excess.
Course 2: Your insurer may ask you to pay the total cost and reimburse the claim settlement amount after deducting the previously chosen excess.
A few insurers allow the vehicle owners to choose a zero excess while purchasing a car insurance policy. Although this appears as a benefit when you hear it, you may have to deal with much higher premiums that may not be desirable for the first time.
What does it mean when an insurer says voluntary excess?
Vehicle insurance premiums are based on the vehicle owner’s profile, area of residence, driving history, claims history, and a few other factors known to your insurer. In the most common situation, you may choose an excess amount at the time of policy purchase, and the insurance provider will cover the remaining amount needed for car repairs/replacement if you make a claim.
Even when the insurer suggests the basic excess (minimum amount), you still have the freedom to choose a higher excess above the minimum voluntarily. It helps you bring down your premium appropriately.
You need to ensure that the high voluntary excess fits within your budget, and you have that money to shell out when the need arises (while filing a claim).
By all means, talk to your insurer to know about scenarios when you may not have to pay an excess or circumstances where you need to cover a higher excess than the amount agreed upon previously.
Know your excess well by thoroughly reading your car insurance NSW policy disclosure statement. Even with the best car insurance, whether you are at fault or the at-fault driver goes missing or is uninsured, you will probably need to pay an excess if you want to file a claim.