Glossary · UK
What is Excess (Insurance)?
The amount a policyholder must pay towards a claim before the insurer pays the rest, made up of a compulsory and often an optional voluntary amount.
Full Definition
An excess is the portion of an insurance claim that the policyholder must pay themselves before the insurer covers the remainder, and it usually has two parts: a compulsory excess, set by the insurer based on factors such as the policyholder's risk profile (for car insurance, commonly influenced by age, driving experience and claims history), and a voluntary excess, an additional amount the policyholder chooses to take on, on top of the compulsory excess, in exchange for a lower premium. Choosing a higher voluntary excess generally reduces the premium, since the policyholder is agreeing to shoulder more of the cost of smaller claims themselves, but it also means a larger upfront cost if a claim does need to be made, so the trade-off needs to be weighed against how much cash the policyholder could comfortably find at short notice if something went wrong. Excess typically applies per claim rather than per policy year, so a policyholder making two separate claims in the same year would usually need to pay the excess again on the second claim; some policies also apply a different, sometimes higher, excess for specific types of claim (for example, a higher excess for young or inexperienced drivers, or for certain types of windscreen or subsidence claim), which is worth checking in the policy schedule rather than assuming a single flat excess applies to everything.