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Find out about car insurance excess and how it works with Savvy’s useful guide.
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Savvy Editorial TeamFact checked
When taking out car insurance, a crucial factor to consider is your excess. Excess plays a significant role in the event of a claim, so it’s important to understand how it works and the financial implications of setting and paying it.
You can learn all about what an excess is in car insurance right here with Savvy. Our informative guide covers what it is, how much it could cost and when you might need to pay it, as well as what the different types of excess are.
In Australia, the excess is an integral part of a car insurance policy. It refers to the amount of money a policyholder is required to pay towards a claim before the insurance company contributes the rest in a covered event.
Example: your car is in an accident and repairs come to $2,000. Your excess is $400, meaning you have to pay for the first $400 of the claim, after which your insurer can cover the remaining $1,600.
Paying an excess is a way to share the risk between the policyholder and the insurer. It also:
The circumstances in which you need to pay your car insurance excess can vary depending on the specific policy and the nature of the claim. Common situations include:
Your excess will be determined when you buy car insurance and will depend on several factors, such as the type of car insurance policy you have and your circumstances. The specific excess amount for your policy should be outlined in your insurance documents. Generally, higher excess amounts result in lower premium costs, while lower excess amounts may lead to higher premiums.
Different types of excess may also apply depending on the type of claim or specific conditions, so it’s essential to review your policy and understand the excess amount applicable to your coverage. For example, if the incident involves a young driver, you may have to pay an age excess on top of your standard excess amount.
In certain cases, depending on your car insurance policy, you may not be required to pay an excess. This could include:
When making a claim on your car insurance, you'll typically need to pay the excess before the claim can be finalised. However, the payment process may vary depending on your provider or type of claim. Generally, there are three ways an excess payment can be made:
The excess is usually paid as a lump sum, although you may be able to pay in instalments if your insurer agrees.
Deciding between a high or low excess depends on your personal circumstances and risk tolerance, so it’s important to weigh up the pros and cons to decide the best choice for you. Here’s a closer look at the implications of having a higher or lower excess:
This is the basic excess amount that can apply to all types of claims and is an essential component of most car insurance policies. It is a predetermined fixed amount set by the insurance provider, taking into account factors such as where you live, the type of vehicle you own and other risk considerations.
Some insurance policies allow you to choose a voluntary excess in addition to the standard excess. This may give you more control over your insurance costs and enable you to lower your premium.
Insurance providers may impose an additional excess for drivers below a certain age, typically under 25 years old, or inexperienced drivers. This excess reflects the higher risk associated with less experienced drivers.
An excess may be imposed if an unlisted or unauthorised driver was driving the insured vehicle at the time of an incident. This encourages policyholders to ensure that all drivers who may use the vehicle are listed on the policy.
A driver history excess may be applied if the driver has a history of claims or driving offences and is intended to reflect the increased risk associated with their past behaviour.
Some policies have a separate excess specifically for windscreen damage or replacement. It can be a lower excess compared to other types and is designed to cover the costs of repairing or replacing damaged windscreen glass.
The excess is typically applied on a per-claim basis, meaning it applies to each separate incident that you claim for. If you have multiple claims in a policy period, you may need to pay the excess for each claim.
If the cost of repairs to your vehicle is lower than your excess when you make a claim, you may be refunded the difference. Alternatively, you may choose to cover the cost yourself out of pocket rather than submitting a claim, which would allow you to keep your no-claim bonus.
You should be able to change your excess when your policy is up for renewal, while some insurance providers may allow excess amounts to be adjusted during the policy term. However, this may come with conditions, so it’s important to check with your insurer to understand their policy.
If you're unable to pay your excess costs upfront due to financial hardship, you should contact your insurer to discuss your situation. They may agree to let you pay in instalments or give you longer to pay the excess. You could also ask for the excess to be deducted from any payout you may receive.
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