Can you explain what car insurance excess is and how it works?

Car insurance excess is a term used to define the amount of money you have to pay before the insurance kicks in. Auto insurance excess is more commonly used in the UK, and is sometimes confused with a deductible in the United States. The difference, though, is that excess works on a per-accident basis while your deductible works across all claims on that policy.

To illustrate how car insurance excess works, assume two different incidents, one with damages of only around $100, and the other with damages of right at $1000. If you have a car insurance excess amount of $100, you would not have a valid claim after paying the excess on the first incident, but you would be able to file a claim for the remaining $900 in the second case.

If you are not found at fault in the accident, your excess payment may be refunded. You would have to pay the initial excess, but if the insurance company is able to secure their expenditures from the at-fault party's insurance, your payment would be refunded when the claim is settled. It doesn't matter who is at fault when the claim is filed, only when the claim is settled.

The idea of car insurance excess is to prevent people from making numerous small claims against their policies. By requiring an excess payment, small claims would be negated before they made it to the insurer, saving the insurance claim for situations where the costs are higher than the excess amount. In the long run, this can help you save money on insurance by preventing your CLUE report from being cluttered with a lot of small claims.

In the UK, all auto insurance policies have what is known as a compulsory excess. This is the amount you have to pay out of pocket with each claim. Some insurers will also let you pay a higher excess amount, called a voluntary excess, which increases the amount of out of pocket costs with the benefit of lowering your premiums. With a voluntary excess, you are able to set the amount you are comfortable with paying out of pocket, and that gives you control over what your premiums will be.