What is insurance excess?

Insurance excess is the amount you pay towards a claim before your insurer pays the rest. For example, if you have a £250 excess and claim for £1,000 damage, you pay £250 and the insurer pays £750. Most insurance policies have an excess — it keeps premiums lower and discourages small claims.

What is the difference between compulsory and voluntary excess?

Compulsory excess is set by the insurer and you can't change it. Voluntary excess is an extra amount you choose to pay on top. Increasing your voluntary excess lowers your premium — but means you'll pay more if you claim. Your total excess is compulsory + voluntary combined.

Should I increase my voluntary excess?

If you can afford to pay more in the event of a claim, raising your voluntary excess can significantly reduce your premium. For car insurance, increasing voluntary excess from £0 to £250–£500 often saves £50–£150+ per year. But don't set it so high that you couldn't afford to pay it in an emergency.

Do I have to pay excess if the accident isn't my fault?

Yes, you typically pay your excess upfront even if the accident isn't your fault. However, if you claim against the other party's insurance (or your insurer recovers costs from them), you should get your excess back. This can take weeks or months. Some insurers offer excess protection insurance to cover this.

Insurance Excess Explained — Compulsory vs Voluntary and How to Save | PocketWise

Every insurance policy has an excess — the amount you pay before your insurer covers the rest. Understanding how excess works helps you make smarter decisions about your cover and potentially save hundreds on premiums.

How Excess Works

Element	Detail
Compulsory excess	Set by the insurer — you can’t change it
Voluntary excess	Extra amount you choose to pay on top
Total excess	Compulsory + voluntary combined
When you pay	At the point of making a claim

Example

Scenario	Amount
Claim amount	£2,000
Compulsory excess	£150
Voluntary excess	£250
Total excess you pay	£400
Insurer pays	£1,600

Excess by Insurance Type

Insurance type	Typical compulsory excess	Common voluntary excess options
Car insurance	£100 – £350	£0 – £1,000
Home insurance (buildings)	£100 – £250	£0 – £500
Home insurance (contents)	£50 – £150	£0 – £500
Travel insurance	£50 – £100	£0 – £250
Pet insurance	£50 – £150	£0 – £250
Private medical insurance	£0 – £500	£0 – £5,000

Why Insurers Set Higher Compulsory Excess

Reason	Example
Young drivers	Car insurance compulsory excess of £300–£500 for under-25s
Flood-risk areas	Buildings insurance excess of £500–£2,500 for flood claims
Certain breeds	Pet insurance excess increases with unusual/risky breeds
Subsidence	Buildings policies often have £1,000 subsidence excess
Pre-existing conditions	Health insurance may set higher excess for specific conditions

How Voluntary Excess Affects Your Premium

Car insurance example:

Voluntary excess	Typical annual premium	Saving vs £0 excess
£0	£600	—
£100	£560	£40
£250	£510	£90
£500	£470	£130
£1,000	£440	£160

The savings diminish at higher levels — going from £0 to £250 saves more per pound of excess than going from £500 to £1,000.

Home insurance example:

Voluntary excess	Typical annual premium	Saving vs £0 excess
£0	£250	—
£100	£230	£20
£250	£210	£40
£500	£190	£60

Choosing the Right Excess Level

The Decision Framework

Question	If yes…	If no…
Could you afford to pay £500 unexpected?	Consider £250–£500 voluntary excess	Keep excess low (£0–£100)
Do you claim rarely (once every 5+ years)?	Higher excess makes sense	Lower excess is safer
Is the premium saving significant?	Worth increasing	Not worth the risk
Can you keep an emergency fund for excess?	Higher excess + emergency fund works	Keep excess affordable

Golden Rules

Rule	Why
Never set excess higher than you can afford	You’ll pay it when you’re already in a difficult situation
Calculate the break-even point	If raising excess saves £100/year but adds £250 to your excess, it takes 2.5 claim-free years to benefit
Consider your claim history	If you claim frequently, low excess is better
Keep emergency savings	Having the excess amount in easy-access savings gives peace of mind

Excess Protection Insurance

Feature	Detail
What it is	A separate policy that refunds your excess if you claim
Cost	Typically £20 – £60/year
Covers	Car insurance excess, sometimes home and travel too
Limits	Often limited to 1–2 claims per year
Worth it?	Only if excess is high AND you’re likely to claim

Is It Worth It?

Scenario	Worth it?
High excess (£500+) and accident-prone area	Possibly
Low excess (£100–£250)	Probably not — the protection costs nearly as much as the excess
Young driver with £500 compulsory excess	Can be worthwhile
Careful driver with no claims	Usually no

Common Excess Mistakes

Mistake	Why it’s a problem
Setting excess too high to save on premium	Can’t afford to claim when you need to
Forgetting about compulsory excess	Your total is compulsory + voluntary
Not knowing your excess amount	Check your policy documents now
Making small claims near the excess value	Claim of £300 with £250 excess — you get £50 but may lose no-claims discount
Not claiming when you should	A £5,000 claim with £500 excess is absolutely worth claiming

When NOT to Claim

Situation	Excess	Claim value	Insurer pays	Worth claiming?
Minor damage	£250	£300	£50	No — lose no-claims
Medium damage	£250	£800	£550	Maybe — weigh NCD loss
Major damage	£250	£5,000	£4,750	Yes
Total loss / theft	£250	£15,000	£14,750	Yes

Summary

Key point	Detail
Compulsory excess	Set by insurer — can’t change
Voluntary excess	You choose — higher = lower premium
Total excess	Compulsory + voluntary
Best approach	Set as high as you can comfortably afford
Emergency fund	Keep your excess amount in easy-access savings
Excess protection	Rarely worth it unless excess is very high
Don’t claim for small amounts	Protect your no-claims discount