How Voluntary Excess Affects Premium Costs
Friday, July 12, 2013, 1:00 AM | Leave Comment
Taking out a voluntary excess as part of your insurance can have a significant impact upon the final cost of a premium. Voluntary excesses involve agreeing to pay an extra contribution percentage for a claim above what’s already been set by an insurance company as a compulsory excess.
Mostly relevant to car insurance, voluntary excesses can be a good idea if you’re a driver that rarely makes a claim, but does have some areas that need to be considered as risky if you do experience problems.
When you take out an insurance policy, a provider typically adds on a compulsory excess waiver; this means that you agree to pay towards the costs of a claim before you’ll receive the majority of it from an insurer.
The amount that you have to pay as a compulsory excess is usually low – around £100 – and is used by insurers to deter small claims, and to lower the average cost of premiums; for new and inexperienced drivers, a compulsory excess can be higher, though, depending on the risk observed by an insurance company.
With a voluntary excess, you increase the amount that you’re willing to pay towards a claim before you can receive a pay out. As well as paying a compulsory excess, this extra amount can be increased or decreased depending on how much you believe you can cover; it may just be another £100, or a larger amount if you’re prepared to shoulder the responsibility of making a larger than average payment in the event of a claim.
Voluntary excess payments effectively represent a calculated risk – by taking them out, you can lower your premium costs, but with the assumption that you’ll be accepting more of a financial burden if you do make a claim. In this context, voluntary excesses work best if you have a strong driving record, and if you tend to use your car occasionally, rather than frequently on busy roads.
Whether or not you increase your excess will depend on the existing deal you have with an insurance company, as well as on an assessment of your specific situation. Insurance companies can be flexible over the level of compulsory excess they offer, as well as how much they’re willing to cut down your premium in exchange for a higher premium.
For example, if you already have a high compulsory excess as a young driver, then paying a voluntary excess can make any potential contribution to a claim too high to be realistic.
The decision to take on a voluntary excess should be entered into with some caution, then, especially if you’re unsure whether you can afford to make payments after an accident.
Voluntary excesses can be a good short term solution if you’re confident that you’re not going to be at a high risk of accidents – for example, if you’ve started using your car less, and don’t feel that you’re going to be driving at times of the day, or to destinations, that are likely to put you in danger.
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Rose is a writer who covers everything to do with insurance and the best ways to save on your premiums. Anyone wanting to find out more about voluntary excesses and ways to find the best insurance deal for you should take the time to compare online providers.
