Sometimes called a “deductible” (although strictly speaking it isn’t the same thing), the excess is the amount you pay towards each and every claim.
It’s called an excess because the insurer is liable for payments in excess of the first part of a claim and up to the limit of cover.
Your home is flooded and you claim for damages totalling £2,000. Your policy excess is £250, which you pay, and your insurer pays out the remaining £1,750.
We aim to repair and replace goods rather than provide the cash so we would ask you to pay us the policy excess first.
If you suffer a loss from an event which impacts multiple insured items, only the highest excess applies
For example; let's say you have insured your laptop with a £100 excess and your tv with a £50 excess. Both items were stolen from your home and are covered under your policy.
When you make a claim we won't add together both excesses but instead you would just have to pay the value of the highest - so in this example £100.
This is the case for any multiple of items, not just two.
Why does it matter?
Things like smart-phones, tablets and laptops get lost, damaged and stolen frequently, so the excess is set deliberately high to deter a high number of low-value claims.
That sounds unfair, it does actually make sense – aside from the insurer’s losses from making settlements, claims cost money to process. The more claims there are, the more the insurer loses in costs that don’t go towards actually paying out to customers but just in overheads. These losses have to be recouped from somewhere and that means cost increases for ALL policyholders, regardless of claims history.
To avoid this happening and to keep prices fair, insurers set the excess at a level high enough to make policyholders think twice before claiming for low values.
The good news is that at Wrisk we are always looking for ways to use technology to make things better. In time, this means we should be able to process claims much more efficiently than a traditional insurance company. This in turn means we will be able to pass these savings onto our customers.
Higher or lower?
If you’ve bought insurance before you’ll probably be familiar with the relationship between the excess and the premium.
In simple terms, the higher the excess the lower the premium (and vice versa). If you’re willing to pay more towards a claim, your insurer will (usually) reduce the premium.
If you’re unlikely to claim on your insurance, it’s probably better to have a higher excess. It’s a small risk but it means you’ll pay a lower premium in the short-term. Just bear in mind that you’ll have to shell out more if you do make a claim.