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From chips and dents to full-scale collisions, road accidents can be difficult to avoid. No matter how decent a driver you consider yourself to be, your vehicle’s safety is never guaranteed. Therefore, comprehensive car insurance is seen by most as a necessity. However, for your car insurance claim to be processed, you will first have to call upon your ‘excess’.
All car insurance comes with an excess—be it basic third party insurance, fire and theft or comprehensive. And, while most people will have some concept of how this excess works, it is understandable that many still find themselves unsure about when it should be paid, how it can vary and ways to reduce it.
Taking the time to understand how your car excess functions might not only save you a lot of stress should you run into some bad luck on the road, but it will also allow you to pinpoint the car insurance policy to suit your needs.
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How Does Car Insurance Excess Work?
Whether you are an experienced driver or have just slapped on your red p-plates, its likely you’ve encountered (or might soon encounter) a minor scrape or ding. When this happens, your excess is likely to influence whether you will make a claim on these damages.
Let’s say your insurance policy’s excess is $1,000. If you make a claim and the cost of the repairs is $1,500, then you will first pay your excess and your insurance company will cover the remaining $500. However, if you are in a smaller accident and the repairs will cost $700, you would pay for the damages out of pocket as this is below your set excess and your provider cannot help— or, put another way, it wouldn’t be worth it financially if they could.
Who pays your excess depends on the situation. Typically, the driver at fault will be asked to shoulder the costs resulting from their actions. While it isn’t uncommon for some drivers to try and avoid paying, honest drivers will usually negotiate your excess, or organise the repairs with you, privately.
If you cannot agree on who was at fault, you would then take your evidence to the respective insurer and reach an agreement via this provider.
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What Is the Purpose of Car Insurance Excess?
In the event of more severe accidents where your car may need serious repairs, or is a write -off, your insurance policy is likely to save you a significant sum. For instance, if you’re facing damages of $10,000, paying a $1,000 excess is going to seem highly favourable.
However, your excess can also ensure that your insurance premiums are more affordable. If you opt for a high excess, your premiums are reduced as you will have more to pay in the event of an accident. Alternatively, if you want your insurance policy to do more of the heavy lifting regarding repairs, paying a higher premium can save you more in the moment.
The concept of an excess also prevents drivers from becoming complacent. Knowing that your insurance is unlikely to help you if you are repairs fall a certain price threshold helps reduce the number of low-value claims the insurer processes.
Related: How Much Does Car Insurance Cost?
Different Types of Car Excess
Not all drivers are created equal, and neither is the excess attached to their insurance policies. Depending on where you are at in life, the excess that applies to your policy can vary. It is wise to understand all the available excess types to ensure your policy is the best possible fit.
Young Driver Excess
If you are a young driver (under 25), or a new driver, an additional inexperience or age excess may apply to your policy. This is to protect your provider against the extra risks that come with your inexperience on the roads. After the age of 25—or at the end of two years for inexperienced drivers over 25— this will no longer apply, and your excess will reduce.
Related: Applying for Your Learner Licence in Australia
Voluntary Excess
Most policy providers will grant you the option to pay a voluntary excess. This is a higher basic excess and is often done as a method of reducing your premiums. If you are a careful driver or your don’t drive frequently, this option could save you more in the long-term. However, you need to ensure you can pay the extra if an accident does occur.
Basic or Additional Excess
Your basic excess is determined based on your claim history, the car you drive, where you live, and the type of policy you have taken out. This is a standard level of cover, however, you can opt-in to additions on this excess, such as the windscreen excess which can include free replacements. Voluntary excess is another addition, as is the extra fee for young or inexperienced drivers. It is also possible to increase your excess to cover any damage caused by undeclared or unlisted drivers.
Can I Reduce My Car Excess?
It is possible to reduce your excess; however, doing so will (typically) increase your premiums. Your circumstances will dictate whether reducing your excess is a smart idea. You may consider reducing your excess, if:
- You drive more frequently—the more time you spend on the road, the more likely you are to be involved in an accident.
OR
- You have more disposable income and can afford the higher premiums.
Depending on your situation there may be other motivations behind reducing your excess. However, for the typical, cautious driver, a high excess may be more worthwhile long-term.
Frequently Asked Questions (FAQs)
When do you pay car insurance excess?
You will pay your car insurance excess if you are at fault for damage to your own, or to another person’s, vehicle. If someone else is at fault for damages to your car, they should cover the excess.
How much is car insurance excess?
There are several factors that will influence the price of your excess. When deciding on your policy you should consider your age, finances, and lifestyle. However, it is safe to say that most Australians, on average, have an excess within the range of $700-850.
Do I have to pay an excess if the accident was not my fault?
Ideally, no. Some policies may require you to cover the excess regardless of who is at fault; however, providing you can prove you weren’t at fault (and your insurer agrees) the guilty party should pay the excess. In the event of an accident you should always aim to take the details of the other party: name, address, registration, and a phone number. If the other driver flees the scene, do you best to note their registration where possible.
Can I change my car insurance excess?
It is possible to change your vehicle’s insurance excess. Depending on whether you want to reduce or increase this excess, your premium will change accordingly. Your circumstances will dictate which option is best for you—ensure you make informed decisions and seek financial advice where possible.
