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Taking Excess to the Excess

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Joe Pattinson looks at insurance excess, how you make sure you set the correct level and how to reduce your car insurance premiums

Back to basics, what is car insurance excess?

Excess is the amount you have to pay in the event of an accident when you are required to make a car insurance claim.

The excess is put in place by insurers so that they can reduce the number of claims they receive because often it is cheaper to pay the cost of any repairs yourself rather than incur the excess.There are two types of excess:

  • Compulsory excess: the amount added on by your insurance company (usually for younger, inexperienced drivers)  
  • Voluntary excess: the amount you are willing to contribute in the event of accident; this can be adjusted when taking out a policy   

Can excess help to reduce the cost of car insurance?

Accepting a higher voluntary excess can help to reduce your overall insurance premium, so essentially, the higher the level at which your voluntary excess payment is set, the cheaper your overall policy is likely to be.

However, the increased voluntary excess is not a direct equivalent to the reduction in your premium.

If you do accept, or ask for a higher voluntary excess it is important that you are sure that you can afford to meet it if you then have to make a claim.

The most sensible course of action would be to save money each month in a savings account, so you have enough money to pay any excess should the worst happen.

Are there any other options to help reduce car insurance premiums, rather than taking a high level of voluntary excess?

  • Pay your premium in full: Although paying a lump sum might seem onerous, paying your insurance in full can actually deliver savings in the long run, as it tends to be cheaper than paying in monthly instalments which usually attract interest.
  • Reduce the overall cost of your premium by making your vehicle more secure, of course your car will be fitted with an immobiliser, but you could consider getting a tracking device fitted, or even something as simple as keeping your car locked in a secure garage overnight will help.
  • Although Department for Transport figures from June 2011 revealed an 11% drop in road traffic accidents in 2010, make sure that in the unfortunate event of you needing to make a claim, that not being able to afford the excess isn’t an added worry.

 Joe Pattinson is general manager for sales & marketing at BMW Financial Services