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A car insurance excess is the amount you pay when you want to make a claim. Excesses mainly exist to deter people from claiming really small damages, or claiming things too often.
It's a toughie when you're already stressed out from needing to make a claim, but unfortunately, all insurers have excesses in place. They can differ by thousands though, so if you haven't already, review what excess you're currently sitting on and consider lowering it if it's out of your price range.
Keep in mind that your premiums will change depending on what your excess is. So if you have a high excess you'll pay less on your premiums, but if you have a low excess you'll have higher premiums.
The car insurance excess is the amount you will be required to pay when you make a claim on your policy. In other words, it’s the amount you agree to contribute towards the cost of a claim, with the insurer covering the remaining amount.
For example, if your policy has a $500 excess and you make a claim for $3,000 damage to your vehicle, you’ll cover the first $500 of the repair costs and the insurer will foot the bill for the remaining $2,500.
However, the amount of excess payable varies depending on a number of factors. Not only does the excess differ according to the policy you select, but you can also adjust your excess higher or lower to vary your premium amount. In addition, specific drivers such as those under 25 years of age, may be required to pay a higher excess amount.
An excess is the amount you pay when you want to make a claim. Premiums are one thing, but if you have to fork out an extra $1,000 after you've had an accident, that can easily eat away at your bank account. Before you sign on the dotted line, have a careful look at what excesses you'd be paying if you want to claim.
Have a look at how some insurers treat excesses below:
| Underwriter | Driver under age 21 | Driver aged 21-24 | Inexperienced driver | Unlisted driver |
|---|---|---|---|---|
 Auto & General |
$600 |
$500 |
$500 |
$600 |
 Insurance Australia Group |
$800 |
$450 |
$400 |
No excess |
 Suncorp |
$400 |
$400 |
$400 |
$1,400 |
 Hollard |
$1,200 |
$800 |
$800 |
$1,600- $2,000 |
The purpose of car insurance excesses is to reduce the number of small claims insurers are required to pay out. If the excess didn’t exist, we’d all be able to lodge claims for every minor little bump, scratch and dent that our cars suffer.
While this may seem like a wonderful idea on the surface, in reality it would cause the cost of car insurance policies to skyrocket, and the premiums could leave a much bigger dent in your bank balance.
But by getting policyholders to agree to pay the first part of each claim themselves, insurers are able to prevent myriad claims for minor repairs and therefore keep car insurance premiums down. This in turn means that you can fall back on car insurance in those situations where you really need the financial protection it provides.
It wasn’t all that long ago that there was only one type of car insurance excess. These days there are several excesses that may apply, and it’s worth remembering that you may need to pay more than one excess when you make a claim. Common excesses include:
All of the excesses listed above may not apply to your car insurance policy. Check the fine print in the PDS for full details of what you’ll be required to pay when you make a claim.
While you will most likely have to contribute some amount towards the cost of a claim, it’s possible in some cases to avoid paying a car insurance excess. Instances where you can avoid paying an excess include:
Whether or not you can avoid paying an excess will once again depend on the terms and conditions of your policy. Check the fine print closely to find out if you’ll have to dip into your own pocket every time you claim.
How you pay your excess depends on the insurer and the nature of your claim. When you lodge a claim, your insurance company will advise you whether the excess:
The circumstances when you do not have to pay a car insurance excess generally depend on the insurer and your individual policy. If your insurer agrees to waive all excesses when you pay an additional premium, for example, then you won’t have to worry about contributing towards the cost of the claim. Just keep in mind that the additional premium you’ll be required to pay will probably be fairly substantial.
If you’ve fallen on hard times, you may also not be required to pay an excess. According to the Australian Financial Complaints Authority (AFCA), if you’re experiencing financial difficulty and unable to pay the policy excess, this shouldn’t mean that your claim cannot be lodged and processed. However, you would need to be able to demonstrate that you are experiencing financial hardship, and you may still be required to pay the insurance excess over time.
The other main situation where you may be able to avoid forking out to pay a car insurance excess is when you are not at fault for the incident being claimed. This is not always the case, as some policies require you to pay an excess regardless of who was at fault.
In other situations, you can avoid paying the excess if you were not at fault and you can meet the conditions outlined by the insurer. For example:
So what can you do if you think you’re being unfairly asked to pay an excess? You could refuse to pay the excess and dispute it, but this means the insurer may not repair your car or may simply deduct the amount from any benefit you receive.
Another option is to pay the excess now, ensuring that your claim is processed quickly and you can get back on the road, and dispute the matter at a later date. However, it’s essential to seek independent legal advice before deciding on the best approach.
The cost of your car insurance excess is determined when you take out cover. There’s a standard excess that applies to cover, but you can choose to adjust this to a higher level and receive lower premiums as a result. On the other hand, you may wish to lower the excess payable at claims time, which will of course lead to a higher premium.
The simplest way to find out the excess that applies to your policy is to check the certificate of insurance. You can also find a guide to the excesses imposed by your insurer in the PDS.
As a general guide, standard excesses tend to range from around $200 up to $700, but could be higher or lower depending on your circumstances.
Yes, you can. When you apply for car insurance cover, many insurers will give you the option to choose your excess. You can:
You’re the only person who can answer that question. It’s really up to you, your budget and which option you think will represent the best value for money.
For example, while lowering your excess will reduce the financial strain at claims time, it means you’ll need to pay more to purchase cover in the first place. On the other hand, increasing your excess makes cover more affordable but could put pressure on your budget if you ever need to make a claim.
Whether you decide to increase your excess, lower it or even keep it at the same level, make sure that you’ll be able to afford to pay premiums whenever they’re due, and that the excess payable when you need to claim won’t put you under significant financial strain.
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