You must have heard about the term ‘excess’ with regard to accidental damage cover of your vehicle. The contribution expected from the policyholder in case of accidental insurance claim is known as claim. Here is a simple example to make it crystal clear:
If you want to claim for £500 from your insurance company and £100 is your accidental damage access, it means that you will have to pay £100 from your own pocket. The remaining £400 will be entertained by the insurer. If in any case, you have
Van Insurance claim accounting to less than £100, you will be more than happy to spend it from your pocket, rather than visiting your insurance provider.
Excess is basically classified into two categories and here is the explanation for them:
- Compulsory excess: This is the mandatory amount charged by the insurance company, whenever you ask for a claim. Though, this type of excess in not included in the terms and conditions of all insurers.
- Voluntary excess: As the name suggests, you may take up the charge on your own wish to contribute towards accidental cover. Thus, total Excess in this case will be calculated as compulsory excess added to voluntary excess.
The benefit of compulsory excess is enjoyed by the policyholder in the form of low premiums fixed by the insurance company. If you are capable of contributing towards minor claims, it will make the insurer happy to keep the premium low for you. One point to be noted here is that value of compulsory excess rises, if you are a novice driver and also, if the cost of the vehicle is high.
The
Voluntary Excess also has benefits to be shared with the policyholder. Just like compulsory excess, this type of excess is also helpful in making the premiums cheaper than before. For this to happen, you must assess all the pros and cons associated with this excess.
If you want to understand with the help of an example, here we go with it:
If you are ready to choose voluntary excess of £150 and there is a
Compulsory Excess of £350 already existing in the policy, your total payout will amount to £500. Now, if the premium of the insurance cover is £300, you might be offered a reduction of £50 on it, in case you choose a voluntary excess of £250.
To summarize
Role of Excess, you may choose to pay higher excess to avail cheap premium value in future. But if you want to pay less, while making a claim, you must choose low excess and higher premium. You have to take a good decision by considering all the points mentioned here.
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