The excess is one of the most important parts of any insurance policy, affecting both your premium and what you pay when you claim, yet it is often misunderstood. This guide explains the insurance excess in plain English: the difference between compulsory and voluntary excess, and how to choose wisely.
What an excess is
The excess is the amount you agree to pay towards a claim, with the insurer paying the rest. If you have a £300 excess and make a £2,000 claim, you pay £300 and the insurer pays £1,700. The excess means you share in the cost of a claim, which discourages very small claims and helps keep premiums down, as our guide to how insurance works explains. Almost all policies carry an excess.
Compulsory excess
The compulsory excess is the part set by the insurer, which you cannot change. It reflects the insurer's view of the risk, and can be higher for certain drivers, vehicles, or types of claim. For example, young or inexperienced drivers often have a higher compulsory excess, and some claims, like subsidence on a home policy, carry a large compulsory excess of their own. You are stuck with the compulsory part, so it is worth checking it.
Voluntary excess
The voluntary excess is the part you choose to add on top of the compulsory excess. By agreeing to pay more towards a claim, you reduce the risk to the insurer, who in return usually lowers your premium. So a higher voluntary excess means a cheaper premium but more to pay if you claim. Setting the voluntary excess is a balance between saving money now and being able to afford the excess later.
How they add up
When you claim, you pay the compulsory and voluntary excess combined. So if your compulsory excess is £250 and you added a £250 voluntary excess, you would pay £500 towards a claim. It is important to know your total excess, not just one part, because that combined figure is what you would actually pay. Always check both parts when you buy, so you know the real cost of claiming.
Choosing your voluntary excess
Choosing a higher voluntary excess can meaningfully reduce your premium, which is tempting, but only set it as high as you could comfortably afford to pay if you had to claim. Setting it too high to chase a low premium can backfire if you then cannot find the excess at claim time. The right level balances a lower premium against an excess you could realistically pay, so choose with a possible claim in mind.
The excess and small claims
The excess affects whether a small claim is worth making. If the damage is only a little more than your excess, claiming may not be worthwhile, since you pay the excess and may lose any no claims discount and face a higher premium next time. Weighing the cost of a small claim against paying for the repair yourself is sensible, and knowing your excess is the starting point for that decision.
Excess protection
Because excesses can be high, some people buy excess protection, a separate policy that reimburses the excess after a successful claim, as our guide to excess protection insurance explains. This lets you set a higher voluntary excess for a lower premium while limiting what you actually pay if you claim. Whether it is worthwhile depends on the cost of the protection against how likely you are to claim, so weigh it up.
Excess on different types of policy
Most kinds of insurance carry an excess, including motor, home, travel and some health and pet cover, though the amounts and structure vary. On travel insurance, for example, an excess may apply per person per claim section. Knowing that the excess is a near-universal feature, and how it works on each policy you hold, helps you understand what you would pay across all your cover, not just on one type, when you come to claim.
Higher excesses for specific claims
Insurers often apply higher excesses to particular, costlier risks. On home insurance, subsidence and sometimes escape of water carry large compulsory excesses; on motor insurance, young or inexperienced drivers face higher excesses. These targeted excesses reflect the higher cost or frequency of those claims. Checking whether any high excesses apply to the risks most relevant to you avoids a shock if you have to claim for one of them, since the amount can be substantial.
The excess and your no claims discount
On motor insurance, the excess interacts with your no claims discount when you decide whether to claim. For a small claim, paying the excess and then losing part of your no claims discount, with a higher premium next year, can cost more than simply paying for the repair yourself. Weighing the excess together with the effect on your discount is the way to judge whether a smaller motor claim is genuinely worth making.
Paying the excess
You usually pay your excess at the point of claim, for instance to the garage repairing your car, or it is deducted from your settlement. This means you need the money available when you claim, which is worth bearing in mind when setting a voluntary excess. If paying the excess at short notice would be difficult, that is a reason to keep it at a level you could comfortably manage rather than chasing the lowest premium.
Reviewing your excess at renewal
Your excess is worth reviewing at renewal, since your circumstances and the trade-off may change. If your finances have improved, a higher voluntary excess might cut your premium affordably; if not, you might lower it. Checking the excess each year, rather than letting it carry over unconsidered, ensures it still suits you, and is part of making an informed decision about your cover overall when you come to renew or switch.
The practical takeaway is to always check both parts of your excess, set any voluntary excess only as high as you could comfortably pay at the moment of a claim, and weigh the excess, along with any effect on your no claims discount, before deciding whether a smaller claim is worth making at all.
In short, the excess is the lever that links your premium to what you pay when you claim, so understanding and setting it deliberately is one of the most practical things you can do to keep insurance both affordable and genuinely useful when you need it.
In short
The excess is the amount you pay towards a claim. The compulsory excess is set by the insurer and cannot be changed, while the voluntary excess is the amount you choose to add to lower your premium. You pay both combined when you claim, so know your total. Set the voluntary excess only as high as you could afford to pay, and remember the excess affects whether small claims are worth making.
Where to get help and next steps
Read our guides to how insurance works, excess protection insurance, and how to claim and avoid rejection. This is general information, not financial advice.