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Car insurance excess is the amount you agree to pay your insurance provider when you make a claim, regardless of who’s at fault.
This amount is agreed upon between you and your insurance provider when you take out your car insurance policy.
However, do you know HOW your car insurance excess affects your car insurance premium?
Do you understand why your monthly premium is so high, or, in contrast, why it’s amazingly low?
Our highly skilled team at CarInsuranceCheck has done all the research so that you don’t have to!
Continue reading and find out how excess affects your car insurance premium so that you can make informed decisions and find the perfect balance that suits your wallet!
What Type of Excess Affects Your Car Insurance Premium?
There are 2 types of excess that affect your car insurance premium, namely compulsory excess and voluntary excess.
Hence, in order to understand how excess affects your car insurance premium, you first need to understand that there are 2 main types of excess and that each type affects your premium in a different way.
Let’s look at the 2 types of excess.
Compulsory Excess
Compulsory excess is the set amount of excess that’s determined by your insurance provider.
The determined amount is based on a standard excess amount, with an additional excess depending on your age, the number of years you’ve been driving, and whether or not you’ve made many claims before.1
The compulsory excess affects your car insurance premium by determining certain risk factors that you’re liable for and thereby increasing the amount that you have to pay when making a claim.
For example
If you’re under the age of 25, your fixed amount of compulsory excess will be much higher than that of a 35 year old.
Voluntary Excess
Voluntary excess works a bit differently because it’s the amount that you, as the client, tell your service provider you want to pay when making a claim.
Why would you want to voluntarily pay more money to your insurance provider when making a claim?
Because the excess amount you volunteer to pay determines whether or not you have a high or low car insurance premium.
In short
It’s mainly the voluntary excess that affects your car insurance premium.
Can I Change My Voluntary Excess?
Yes, you can change your voluntary excess, as most insurers will let you raise your voluntary excess to lower your premium.
Why?
Because increasing your excess moves some risk from the insurer to you.
The question is how much should you change your voluntary excess, and what would be the right amount?
Keep reading, as this article will continue answering these questions.
Does Increasing My Excess Reduce the Premium?
Yes, increasing your voluntary excess reduces your car insurance premium as it removes pressure from your insurance company to pay out more when you make a claim.
By increasing your voluntary excess, you tell your insurance provider that you’ll pay more, and they’ll have to pay less when you make a claim.
Thus, as an exchange, your insurance provider will lower your monthly premium.
Just be careful
You don’t want to make your excess too high and find yourself unable to pay it.
Should I Take a Higher Excess or a Higher Premium?
It’s recommended to take a higher excess, which will lower your monthly premium amount.
However
Whenever you increase your excess amount, you should ask yourself if you’re able to make the excess payment when making a claim.
You don’t want to increase your excess amount just so that you can have a low premium every month and find yourself not being able to pay the excess.
Which will result in your insurance provider not paying out when you make a claim.
Thus, choose a higher excess amount that you’re confident that you’ll be able to pay later, which will also lower your monthly premium.
What’s a Good Excess Amount?
A good excess amount is subjective and depends on each individual based on their income and what they are able to pay.
A standard car excess would be R2 500 per claim, or 5% of the claim, or a mix of the 2.
However, it would be good if you could aim for an excess of less than 10% of the insured value of your car.2
But don’t forget
When looking for a new car insurance policy, you want to make sure that you choose an excess amount that you feel you can comfortably pay when the time comes.
You don’t want to make your excess too high and put yourself in a situation where you can’t pay the excess.
However, you also don’t want to be paying extremely high monthly car insurance premiums because you don’t want to pay any excesses.
You want to find a good middle ground between a reasonable monthly premium and a realistic excess amount that you’re able to pay when the time comes.
Common Questions
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In Conclusion
Our CarInsuranceCheck team compiled all the research about how excess affects your car insurance premium, so we trust you’ve acquired all the knowledge you need.
It’s important to remember that there are 2 main types of excess that affect your car insurance premium, namely compulsory excess and voluntary excess.
It’s recommended that you take a higher voluntary excess so that you can decrease your monthly premium, but you have to make sure that you’re able to pay the excess amount when you want to make a claim.
Ultimately, it depends on what you can afford – a high excess amount when the time comes or a high monthly premium.
Feel free to reach out to us if you need any support on your car insurance journey.