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NICOL Insurance Services > Blog > What Is Excess in Insurance?
What is Excess in Insurance
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  • Posted by: noye

What Is Excess in Insurance?

If you ever had any insurance other than life insurance, there is almost a certainty that you’ve come across the term ‘Excess’. The meaning of the word insurance differs a lot from what we use it for in our day-to-day lives. So, what is excess in insurance?

In plain terms, the excess is an amount of money that you need to pay to the insurance company. But isn’t that why premiums are in place? Well, the main difference between premiums and excess is that, unlike the premium, you don’t have to pay the excess regularly. When you claim the insurance, you need to pay a certain amount of the insurance money while the rest is covered by the insurance company.

Let’s take a detailed look at excess and how it works.

What is excess in an insurance policy?

insurance policy

Suppose you own a car and have it insured. Suddenly one day, someone barges into your car, denting it. The repair cost of the car is calculated to be $500. As you’re insured, you claim the money from your insurance company. But they said they will only pay $400 while the remaining $100 has to be covered by you. This is one of the excesses in insurance examples.

So, an excess clause in insurance means an amount of money you must pay to the insurance company that will be deducted from your total claim.

How many types of excesses are there?

There are two main types of excesses that insurance companies offer. They are:

1. Compulsory excess:

This is the amount that you must pay when you claim your insurance money. This amount is set in stone and is agreed upon before the insurance is agreed upon. The amount of compulsory excess varies according to the policies that are adopted.

For example, if the driver of a car is young, they are considered risky, so their insurance will have higher compulsory excess. On the other hand, insurance that isn’t considered very risky will have a lower amount of compulsory excess.

2. Voluntary excess:

When you go to agree on an insurance scheme, you’ll find that you have another type of excess apart from the compulsory one, named ‘voluntary excess. So what is voluntary excess insurance

Voluntary excess is the excess people willingly pay on top of the compulsory excess. But why would people do that? Won’t that only reduce their money? How does insurance work? Before you go down the rabbit hole of questions and become confused, let me tell you about the truth behind voluntary excess. 

The more you spend as the excess payment in insurance, the less premium you’ll have to pay. So if you spend more money as voluntary excess, you won’t have to pay as much money in premiums. So it’s a good way to save money.

What is an excess insurance policy?

Some policies cover whatever someone pays as an excess. This policy applies to a lot of policies offered by insurance companies.


In the previous example, you’d have to pay $100 as an excess. But if you have an excess insurance policy covering it, then the entire $100 will be refunded to you.

What is Excess Protector In Insurance?

Excess protectors are quite similar to excess insurance, with a slight difference. While excess insurance will cover you regardless of anything, excess protectors will only cover you if any third party isn’t found that is responsible for the claim. A prime example of an excess protector is when people make theft claims.

Since it is virtually impossible to claim insurance against the thief, the excess protector will cover the excess payable.

When do you pay an excess?

While most insurances compel you to pay the excess, such as car insurance, it doesn’t mean that you’ll have to pay the excess every time. Some insurances don’t require you to pay any excess.

Examples of such insurance are life insurance and a few travel insurance. Other than these, you’ll always have to pay excesses.

Final Words

What is excess in insurance? It is the amount you need to pay to the insurance company which is then subtracted from your total insurance claim.

More often than not you will have to pay an excess, the amount of which was agreed upon previously. On top of that, you can agree to pay an additional amount of excess to reduce your premium. 

But you don’t always have to pay insurance excess as life insurances are exempt from them. But be careful while paying voluntary excess because choosing to pay too much excess to save money will hurt you in the future.


1. Do I have to pay the excess?

Whether you have to pay an excess or not depends upon the type of insurance you have.

If you have, for example, car insurance, then you must pay the excess. On the other hand, if you have life insurance, then you don’t have to pay the excess.

2. Is it better to have high or low excess?

The benefit of having high or low excess depends entirely upon how much you can afford. At first, it seems like having high excess is better for you as it lowers the premium you have to pay.

But if you set the voluntary excess too high, you will then run the risk of not being able to afford it at all. So think carefully before setting an excess.

3. Why do insurance companies charge excess?

Insurance companies charge excess as a means of distributing the risk. If the insurance company bore the entirety of the claim, then people would act too rashly to cause more trouble, sometimes willingly to get money. By implementing excess, they distribute some portion of the risk back to the client.

As a result, people will be more responsible and the risk of unfair means will be reduced.

4. Do I pay an excess if it’s not my fault?

If it is up to the insurance companies, you will have to pay the excess even if you aren’t at fault. But this isn’t a fair outcome for the innocent.

To avoid this, you can follow a different route and contact a credit hire company. These companies will claim against the driver who is at fault and their insurance.