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Excesses and how they work

An excess is the amount a customer needs to pay if they make a claim on their insurance policy.

For most of us, the excess amount is outlined in your Product Disclosure Statement or policy wording and represents the amount a customer has agreed to contribute towards the claim, with the insurer covering the remaining amount.

How does it work exactly?

Let’s say you’re involved in a car accident and you’re found to be at fault, the cost of repairing your car might be $4000 and damage to another car might be $3000. But if your excess was $600, you would pay the first $600 and your insurance company pays the remainder of your costs and the costs of the other vehicle.

Similarly, if your house was affected by a severe storm, and the cost to repair the damage was $7000 and your excess was $900, you would pay $900 and your insurer pays $6100.

There are different types of excesses

It’s important to understand the different types of excesses before you purchase your insurance policy.

Many insurance policies have either a voluntary excess or a standard excess.

  • A standard excess means that it applies to every claim.
  • A voluntary excess can be chosen by customers and while it may reduce the cost of your premiums, it’s a higher cost than a standard excess.

There can be situations where multiple excesses will apply when you make a claim. For example, if a young driver is involved in a car accident, an inexperienced driver or an age excess could apply on top of the standard excess.

How to pay your excess

In most cases your insurer will ask you to pay the excess directly to the repairer or supplier who has been appointed to help with your claim, or your insurer may deduct the cost of the excess from the amount that it pays to you.

Sometimes you will be required to pay the excess in full before you receive the payout or any other benefits that are part of your policy.

There can be situations when your excess is waived

In some cases, your insurance company may waive the excess and some policies may not have an excess at all.

An example of a situation where excess may not apply is if you’re involved in a car accident where it is agreed that you were not at fault and you can provide the name and address of the person who was at fault.

In this case we the excess may be waived because you have provided the details of who we can recover the costs from, whether that is the person who at fault or from their insurance company,” he adds.

Where to get more information

If you need to make a claim and aren’t sure about your excesses or how they work, give our friendly team a call on 8925 5901 and we’ll be happy to help you. 

 

This article was originally published on the QBE website as https://www.qbe.com/au/news/excesses-and-how-they-work

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