A breakdown of the types of car insurance excesses and how to pick one that suits you.

You might know that you need car insurance or already have cover, but you might be procrastinating reading through the fine print of that cover. It’s hard to find the time and motivation to make your way through the jargon that’s often sitting in insurance policy wordings.

But jargon shouldn’t stop anyone from knowing what their car insurance covers. Which is why we have written this article – in plain English – on one of the most important components of car insurance cover; the excess.

What is an insurance excess?

Your excess is the amount of money that will come out of your pocket when you make a claim. Think of it as the contribution you have to make; your insurer will then pay the remaining balance.

How does an excess work?

Let’s say you chose R5 000 as your excess when you bought car insurance. After a minor accident, you claim from your insurer to repair the damage. The repair on your car costs R20 000. You will have to pay R5 000 of the R20 000 and your insurer will cover the rest, ie. R15 000.

What excess should I choose?

The higher your excess, the lower your insurance premium will be, and vice versa. So, choosing an excess is about finding a sweet spot between what you pay on a claim and what you pay each month for your insurance.

One way to calculate an appropriate excess is to determine the maximum amount you can comfortably afford to pay out of your pocket if you had to make a claim tomorrow. Picking this level means you’ll avoid getting into trouble when it comes to claiming, while minimising the amount you have to pay for insurance each month.

One little thing to think about: it’s possible you’ll need to claim more than once in a year, and you’ll need to pay the excess each time. So be sure you have the cash to cover more than one excess, just in case.

What types of excesses are there?

Different insurers have different types of excesses. Be sure to ask your insurer upfront what types of excesses they have so that you are not caught off guard when it comes to claiming.

Flat amount excess

Many insurers will have a set, flat amount that you will have to contribute towards your claim – this isn’t an amount that you can choose. For example, it could be R3 000 that you will contribute to every claim you make, irrespective of the amount of the claim. Other insurers will allow you to choose a flat excess from a range.Your flat excess is the amount that you will contribute towards your claim no matter how big or small the claim is.

Percentage of claim excess

Some insurers have a percentage excess that is proportionate to your claim. For example, your insurer might say that you have a 10% of claim excess. So, if you have a claim of R100 000 you will contribute 10% of R100 000, ie. R10 000, while your insurer will pay R90 000. These types of excesses are more difficult to budget for and could easily add up to very large amounts. For example, if your R350 000 car is stolen, your contribution would be R35 000.Your excess will be in proportion to the size of your claim.

Also keep in mind that when an excess is percentage based, the insurer typically has a minimum excess which is applied to smaller claims. For example, let’s say the above insurer has a percentage excess set at 10% and their minimum excess set at R3 000. In the case where a claim is less than R30 000, the minimum excess will be applied.

Special/Additional excess

Depending on the circumstances of your claim, some insurers apply an additional excess. The most common circumstances are: if the driver is below the age of 25, if the person driving at the time of the accident has only had their driver’s licence for less than two years, or the person driving at the time of the accident isn’t listed on the policy.

Additional excesses could even apply if the claim happens after a certain time at night or in your first three months after taking up the policy.

It is best to ask your insurer about any additional excesses before you purchase your policy to make sure you don’t get any nasty surprises at the claims stage.

Glass/windscreen excess

Some insurers have a special excess for glass/windscreen claims; sometimes glass claims are even excess-free. Be sure to read your policy wording so that you know what to expect when you claim for glass or your windscreen.

Why are there excesses in the first place?

Insurance is there to help you when you cannot afford to pay for a loss yourself. For instance, having your car stolen might put you in a dire financial situation, and insurance can prevent that. But imagine that everyone claimed for the smallest of damages, eg. a barely visible scratch on your hubcap. Administrative costs would far outweigh the value of the actual claim, which would in turn increase everyone’s premiums.

Insurers have also found that when you have some skin in the game, you are likely to be more careful with your car, meaning premiums can be reduced even further.

By having an excess, it keeps smaller claims to a minimum and also reduces the likelihood of a claim, making premiums more affordable for everyone.

When will I have to pay an excess?

You will be responsible for the excess every time you make a claim. You might have to physically pay the money or it could take the form of a reduction in the payout to you.

For example:

  • If your car is stolen or written off, your excess will take the form of a reduction in your payout, eg. if your R300 000 car was stolen and you had a flat excess of R5 000 you will be paid out R295 000 (R300 000 less R5 000); or
  • If your car can be repaired, you will make an actual payment of your excess amount to the panel beater when you pick up your car after repairs.

If the accident was not my fault, do I still pay an excess?

Even if the accident was someone else’s fault you will still have to pay your excess. Your insurer will try to recover the cost of the repair from the third party and if they are successful, they will refund your excess. The reason for your insurer processing your claim in this way is that they want to get you back on the road ASAP and when the accident isn’t your fault, it usually involves lawyers, court cases, etc., which can make the process a lot longer.

This means that you will only suffer a temporary loss if their recovery is successful.

What happens if you can’t afford to pay an excess after an accident?

This varies from insurer to insurer. They might offer you a payment plan or they might not start repairs or release your car from the panel beater until you have paid the excess. This is why it’s important to choose an excess that you can afford to pay so that you’re not stuck without a car when you need it.