What is excess on car insurance?

An excess in car insurance is a set amount of money you may need to pay your insurer when you lodge a claim. An excess is generally on all types of car insurance, whether it’s Third Party Property Damage, Third Party Property Fire and Theft or comprehensive car insurance.

If your claim is successful, the amount of excess may be taken off the costs covered by your insurer to repair or replace your vehicle. If you’re deemed not at fault for the accident, you may not be required to pay the excess.

Your basic excess, or standard excess, is a set amount of money you may have to contribute to a claim, which is established at the start of your policy term. For example, if it’s set at $500, that’s the amount of basic excess you may have to pay when you make a claim.

You can usually amend this amount as long as it’s done in accordance with the conditions of your policy. The amount you select as your excess could impact your car insurance premium. As a general rule, the higher the excess you choose or nominate to pay, the lower your overall premium will be. Conversely, if you lower your excess, a higher premium may apply.

These are some of the different types of excesses applicable in different claim scenarios:

• Basic excess (standard excess). This is the amount of money you may have to contribute to a claim under the terms of your policy in most situations.
• Age excess. This is applied to a claim for an accident where the driver was under a certain age.
• Unlisted driver excess. This is applied to a claim when the driver at the time of the incident wasn’t listed on the policy.
• Learner driver excess. Applied to drivers with a learner’s licence.
• Inexperienced driver excess. Applied to drivers over the age of 25 who have held a valid Australian licence for less than two years.
• Fixed kilometre plan excess. Applied as an additional excess for an agreed distance plan if you go over your agreed amount as set out in your policy.

Some of these listed types of excesses may be referred to by different names by different insurers; there may also be other excesses applicable under your policy. You may find that, depending on the circumstances of your claim, you might have to pay one of these excesses in addition to your basic excess.

It’s always best to check your policy’s relevant Product Disclosure Statement (PDS) or your Certificate of Insurance for an accurate list of any applicable excesses and exclusions. It’s also worth checking the Target Market Determination (TMD) to make sure the product is right for you.

For a basic excess, the default amounts can vary up to several hundred dollars, depending on your policy and provider. For other specific excess types, the excess amounts are fixed and detailed in your policy’s PDS.

Your excess amount can often be amended to suit your situation. If you think it’s unlikely you’ll need to claim on your insurance, or you haven’t made a claim for some time, choosing a higher excess may be a way to get a lower premium.

If you want to change your excess amount, you can typically do this around renewal time.

When lodging an insurance claim, your insurer will advise you if or when you need to pay an excess during the claiming process.

While most claims typically require an excess payment, there are some circumstances where you may not need to pay an excess. For example, if you’re deemed not at fault and you can provide your insurer with the relevant information of the at-fault person, you may not need to pay an excess for your claim.

You can usually find when you can expect to pay an excess in your policy’s PDS.

As a general rule, you would pay an excess for a claim if you (as the policyholder) are deemed to be at fault for the accident.

Depending on the circumstances of your claim, you may be liable to pay an excess even if you’re not the at-fault driver, like if you or your insurer can’t identify the other party nor record any details. This may happen in a hit-and-run accident when the other driver flees the scene or refuses to hand over details.

Generally, car insurance excesses are paid as a lump sum to your insurance provider when settling your claim. However, there may be an option for alternate payment arrangements or assistance for those experiencing financial hardship.