Understanding Car Insurance Excess: Your Guide to Policy Costs

Navigating the world of car insurance can sometimes feel like deciphering a foreign language, and 'excess' is one of those terms that frequently causes confusion. But understanding what car insurance excess is, how it works, and how it impacts your policy is crucial for managing your motor expenses effectively. This comprehensive guide will break down everything you need to know about insurance excesses in the UK, from the basic definitions to the latest trends and how to make informed decisions about your coverage.

What Exactly is Car Insurance Excess?

At its core, car insurance excess is the amount of money you agree to pay towards any claim you make before your insurer contributes. Think of it as your contribution to the repair bill or the cost of replacing your vehicle. It’s designed to ensure that policyholders have some 'skin in the game', discouraging minor or fraudulent claims and helping insurers manage their overall costs.

When you make a claim, your insurer won't cover the full bill. Instead, they will deduct your agreed-upon excess from the total cost of the claim and then pay the remaining amount. If the total cost of the damage is less than your excess, you'll be responsible for the entire repair bill, and your insurer won't pay out anything.

The Two Sides of the Excess Coin: Compulsory vs. Voluntary

Car insurance excess is typically split into two distinct parts, and understanding the difference is key:

Compulsory Excess: This is the minimum amount set by your insurance provider. It’s a standard figure that applies to your policy, often determined by factors like your age, driving history, the type of car you drive, and the insurer's risk assessment. It cannot be changed by you.

Voluntary Excess: This is an amount you can choose to add to your policy. By agreeing to pay a higher voluntary excess, you are essentially telling the insurer that you are willing to take on more financial responsibility in the event of a claim. In return for this increased risk, insurers often offer a lower annual premium. It's a trade-off between upfront cost savings and potential out-of-pocket expenses later.

These two types of excess are usually combined to form your total excess. For example, if your compulsory excess is £250 and you choose a voluntary excess of £300, your total excess will be £550. This means that for any approved claim, you would need to pay £550 before your insurer contributes.

Why Does Excess Matter? The Rising Trend

The amount of excess people are choosing has been on the rise. According to reports, there's been a noticeable increase in drivers opting for higher voluntary excess amounts, such as £500. This trend is driven by a desire to reduce annual insurance premiums, especially for younger drivers or families managing tighter budgets. However, it’s crucial to understand that while higher excess can lower your upfront costs, it significantly increases your financial exposure if you need to make a claim.

The average voluntary excess chosen by customers has hit record highs, meaning a typical total excess could easily exceed £600. This is a significant sum for anyone, particularly new drivers or families trying to save money on their car insurance.

How Does Excess Work in Real Life? A Practical Example

Let's illustrate how excess works with a common scenario:

Ayesha, a 19-year-old who has just passed her driving test, insures her first car, a used Ford Fiesta, with a comprehensive policy. To keep her initial costs down, she agreed to a £250 compulsory excess and added a £250 voluntary excess, which shaved £180 off her annual premium. Her total excess is therefore £500.

One rainy afternoon, she unfortunately bumps into a parked van. It was her fault, and the repair bill comes to £1,400.

Here's how the claim would be processed:

• Total damage cost: £1,400
• Ayesha's total excess (compulsory + voluntary): £500
• Insurer's contribution: £1,400 - £500 = £900
• Amount Ayesha must pay upfront: £500

While Ayesha saved £180 annually on her premium by choosing the higher excess, she had to pay £500 instantly to get her car repaired. This single claim wiped out her annual savings and then some. Had the damage been less than £500, her insurer would not have paid out anything, and she would have had to cover the entire repair cost herself.

Risk Versus Savings: The Trade-Off

The decision to increase your voluntary excess is a calculated risk. Drivers who raise their voluntary excess from £250 to £500 can save, on average, 27% on their annual premiums. However, this saving comes at the cost of a significantly higher potential payout if an accident occurs. It’s a classic case of 'you pays your money, you takes your choice' – balancing immediate savings against future financial preparedness.

Do You Always Have to Pay the Excess?

No, you don't always have to pay the excess, but in most claim situations, you will. Whether you need to pay depends on several factors:

• Who is at fault: If the accident was entirely your fault, you will almost certainly pay your excess.
• Type of claim: Different types of claims have different rules regarding excess.
• Insurer's internal rules: Some insurers may have specific policies regarding excess payments.

When You Typically Pay Your Excess:

In most common claim scenarios, your insurer will request the full excess (compulsory and voluntary). This includes:

• At-fault accidents: Any collision where you are deemed responsible.
• Single-vehicle incidents: Such as skidding off the road or hitting a stationary object.
• Fire, theft, or vandalism claims: Even if you weren't driving, you generally pay excess for these. For example, if your car is stolen and recovered with damage, you still pay your total excess.
• Unidentified third-party claims: If the other driver involved cannot be identified (e.g., a hit-and-run where the other vehicle wasn't seen).

It's worth noting that the average excess for theft claims has seen a significant increase, as have excesses for accidental damage and fire claims.

When You Might Not Pay Your Excess:

There are a few exceptions where you might not have to pay your excess, or a reduced amount:

• No-fault accidents: If the other driver is 100% at fault, and your insurer can successfully recover the full cost of the repairs from their insurance provider, your excess may be reimbursed. This process can sometimes take time, as liability needs to be firmly established.
• Glass-only claims: Many insurers waive the excess, or apply a much smaller one, for windscreen repairs or replacements. This is a common benefit designed to encourage drivers to keep their windscreens in good condition. Always check your policy wording for specifics.
• Excess Protection Insurance: This is a separate, optional policy you can purchase that covers the cost of your excess in the event of a claim. It typically involves an annual fee and can provide valuable peace of mind if you have a high total excess.

Important Note: Even in situations where your excess might be reimbursed, insurers will almost always ask you to pay the excess upfront. Any refund will come later, after liability is confirmed and costs are recovered. Unless you are absolutely certain the other party is at fault and willing to admit it, it's best to assume you will be paying the excess when you make a claim. If in doubt, always check your policy wording or contact your insurer before proceeding.

Why Are Insurance Excesses Rising in 2025?

Several factors are contributing to the upward trend in insurance excesses:

• Increased Repair Costs: Modern vehicles are equipped with advanced technology, such as complex driver-assistance systems (ADAS) and sophisticated sensor arrays, which significantly increase the cost of repairs. The expense of electric vehicle (EV) components and precise paint matching also adds to the bill. Repair costs have seen a substantial rise in recent years.
• Higher Theft Rates: An increase in vehicle theft rates means insurers face more claims related to stolen vehicles, pushing up the average excess for such claims.
• Vehicle Complexity: The integration of advanced technology and the shift towards EVs mean that repairs are often more intricate and expensive, requiring specialised knowledge and parts.
• Economic Factors: Insurers are adjusting excesses to offset rising claim settlement costs and to manage their own financial stability. Instead of dramatically increasing premiums for everyone, they often raise excesses as a way to share more of the risk with the policyholder. In 2024, insurers paid out an estimated £11.7 billion in motor insurance claims, and to mitigate these costs, many have opted to increase excess levels.

This 'excess inflation' is becoming a standard feature of the insurance market, serving as a mechanism for insurers to shift risk and for drivers to potentially lower premiums upfront, albeit with a greater financial commitment if a claim arises.

The Impact on Young Drivers

Young drivers, particularly those under 25, are often hit hardest by rising excesses. Many insurers now impose higher compulsory excesses on this demographic, sometimes £300 or more, regardless of their driving record or claim history. This can push the total excess payable to £600 or higher, making accidents financially punishing for new drivers who are already trying to manage their budgets.

Stat Snapshot: Excess Trends (2025)

How Much Excess Should You Choose?

Choosing the right voluntary excess is a personal financial decision. The general advice is to select the highest voluntary excess you can realistically afford to pay out of pocket without causing significant financial strain. It’s a delicate balancing act:

• Saving money upfront: A higher voluntary excess will lower your annual premium.
• Avoiding costly regret: You need to be able to comfortably cover the excess amount if you need to make a claim.

Consider the potential savings versus the risk. Raising your voluntary excess from £250 to £500 might save you around 27% on your annual premium, but that saving can quickly disappear if you have to pay out £500 for a claim. It’s about assessing your personal financial resilience.

Visualising the Impact of Excess Levels

Let's look at how different voluntary excess levels (assuming a £250 compulsory excess) impact your situation:

*This table assumes a £250 compulsory excess across all scenarios and illustrates the potential premium savings versus the amount you pay in a claim.

Who Should Set a Low Excess?

A lower excess is generally advisable for:

• New drivers with low savings: They may not have the financial buffer to cover a high excess if an accident occurs.
• Parents adding children to their policy: Young drivers often face higher compulsory excesses, so keeping the voluntary excess low can mitigate the overall financial risk for the family.
• Anyone who has recently financed a car or is still paying it off: The financial strain of unexpected repair costs could be unmanageable.
• Drivers worried about sudden repair costs: If even a moderate repair bill would cause financial hardship, a lower excess offers greater protection.

While a lower excess might mean a slightly higher monthly or annual premium, it provides crucial protection against significant, unexpected expenses.

Who Can Afford to Push it Higher?

Conversely, a higher voluntary excess might be suitable for:

• Experienced drivers with emergency funds: Those with a financial safety net can absorb the cost of a higher excess.
• Drivers with spotless driving records: A history of safe driving reduces the perceived risk.
• People insuring second or infrequently used vehicles: If the car is used less often, the likelihood of making a claim might be lower.
• Drivers comfortable managing risk in exchange for lower premiums: If you understand the implications and can afford the higher excess, the premium savings can be substantial.

If you can comfortably afford to pay £500 or £600 without it impacting your finances, a higher excess could be a sensible trade-off for lower premiums.

The Risk of Choosing a High Excess: The False Economy Trap

The primary risk of a high excess is that it can make claiming financially unviable. This can lead to drivers either avoiding making legitimate claims altogether or absorbing the entire cost of repairs themselves. What initially seemed like a smart saving on premiums can turn into a painful false economy.

Here’s a common scenario:

1. You increase your voluntary excess to £500 and save £150 on your annual premium.
2. Six months later, someone reverses into your parked car, causing damage.
3. The repair quote is £800.
4. To make a claim, you must pay your total excess: £500 (voluntary) + £250 (compulsory) = £750.
5. The insurer will pay £50 (£800 - £750).
6. In this situation, you might decide not to claim and pay the full £800 yourself.

The initial £150 saving is gone, and you've incurred an extra £650 in costs and stress. This is more common than many people realise, especially with minor damage that falls close to the excess amount.

When You Might Regret a High Excess:

• Low-speed scrapes and scratches: These often cost less than £1,000 to repair.
• Single-vehicle accidents: Such as hitting a kerb or reversing into a post.
• Fire or theft claims: Where you might expect full coverage but still have to pay the excess.
• Third-party-at-fault situations: Where establishing liability and recovering costs can take months, delaying any reimbursement of your excess.

How Can You Save on Car Insurance Without Raising Your Excess?

Fortunately, there are several ways to reduce your car insurance costs without resorting to increasing your excess:

1. Telematics (Black Box Insurance): Especially effective for new drivers, black box policies monitor your driving habits. Safe driving can lead to discounts and potentially lower compulsory excess levels.
2. Reduce Annual Mileage: The less you drive, the lower the risk. Accurately estimating and capping your annual mileage (especially under 7,000 miles) can lead to lower premiums. Be honest, though, as under-reporting mileage can invalidate your policy.
3. Improve Your Vehicle's Security: Installing Thatcham-approved immobilisers, dash cams, steering wheel locks, or tracker devices can reduce theft risk and help keep premiums and excesses lower.
4. Shop Around Regularly: Loyalty rarely pays in the insurance industry. Use price comparison tools, switch providers annually, and always double-check coverage limits, excess amounts, and any hidden charges. This can easily save hundreds of pounds without compromising your financial safety net.

Parents and Young Drivers: A Crucial Consideration

Parents insuring young drivers need to be particularly vigilant about excess levels. High compulsory excesses can often go unnoticed until a claim is made. A seemingly cheaper policy might end up costing significantly more after even minor accidents due to these hidden excess charges.

Case Example: Adding a Teen Driver

Imagine adding an 18-year-old daughter to your comprehensive policy. To get a better quote, you agree to a £250 voluntary excess and a £400 compulsory excess for the young driver, making a total excess of £650. Your daughter then bumps another car while pulling out of a junction, and the repairs cost £900.

Your family would have to pay £650 just to make the claim. Furthermore, you might lose your no-claims discount the following year, effectively costing you more than the repair itself.

Tips for Parents:

• Always check the total excess on any multi-driver policy.
• Consider standalone policies for young drivers, especially those utilising black box technology.
• Don't hesitate to contact insurers directly to clarify excess terms for different claim types (theft, windscreen, accidents).

What If You Can’t Afford to Pay the Excess?

If you find yourself unable to pay your excess, you face two difficult options: pay the full repair cost yourself or forfeit your ability to make a claim under your insurance policy. This underscores the importance of knowing your excess amount before you need to make a claim.

Solutions if You’re Caught Short:

• Excess Protection Insurance: As mentioned, this is a separate policy that refunds your excess after a claim. It’s typically inexpensive (£20-£40 a year) and highly recommended if your total excess is £500 or more.
• Ask About Payment Plans: Some repair centres or insurers may offer instalment options for paying the excess. While not always widely advertised, it's worth enquiring if your claim is approved.
• Decline the Claim: If the cost of repairs is close to or below your total excess, it might be more financially sensible to pay for the repairs yourself and avoid making a claim.

Your Excess is Your Financial Safety Net

Your insurance excess is more than just a number on a policy document; it's your financial safety net. Setting it too high simply to save £10 a month could end up costing you hundreds, or even thousands, later on. Ensure your excess is a figure you could realistically pay within 24 hours without plunging yourself into debt. Make informed choices, understand the risks, and choose an excess level that balances savings with your financial preparedness.

Summary: What Matters Most About Excess in 2025

In 2025, understanding and managing your car insurance excess is more critical than ever. With rising repair costs and a trend towards higher voluntary excesses, drivers must be acutely aware of the financial commitment they are undertaking. By differentiating between compulsory and voluntary excess, assessing your personal financial situation, and exploring all available options for reducing premiums without compromising your ability to claim, you can ensure you have the right car insurance cover for your needs.

Frequently Asked Questions:

Does insurance cover windscreen repairs?

Yes, many insurance policies include cover for windscreen repairs or replacement. Often, insurers will waive the excess or apply a significantly lower excess for glass-only claims, making it more affordable to keep your windscreen in good condition.

How do I contact AXA glass?

If you need to contact AXA for a glass claim, you can typically call their Glass Team on 0330 024 1306. This line is operated by Autoglass and is available 24/7.

Can I use my own repairer?

Many insurers allow you to use your own chosen repairer. However, they may have limits on how much they will contribute towards the cost of repairs or replacements, especially if you choose a repairer outside their approved network. For example, an insurer might pay up to £100 towards a replacement or £50 towards a repair, after you have paid your excess.

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