What Is Excess In Car Insurance Australia: A Complete Guide

When assessing your insurance needs, insurers may offer you an 'insurance excess' as a part of a car insurance policy. It is the amount a policyholder pays when making an eligible insurance claim as part of the policy.

In this blog, you will learn what the excess in car insurance is, the different types, when you have to pay it, what it exactly means when making a claim, and more.

1. What Is Excess In Car Insurance?

Now let us understand what excess means in car insurance. Car insurance policyholders must pay a certain excess amount when claiming the policy. 

This amount is only payable when the accident is the fault of the policy owner. No excess is due when the driver is not at fault in the accident.

Excess is the amount that both parties, the insured person and the insurer, agree to contribute towards claim charges. The insurer will cover the rest of the amount (up to the coverage limit). 

Let us understand the concept with the help of a car excess insurance example. Suppose you hold a car insurance policy that has a $500 excess. 

Now, suppose you have an accident and want to claim to compensate for the repair costs of $3,000, to claim $3,000. In that case, you need to pay $500 first for the repair costs, and your car insurer will pay you after deducting the paid excess amount of $2,500. 

Thus, the excess is the part that you pay out of pocket when you claim your policy to get the car fixed.

The amount of applicable excess on a policy depends on various factors that include:

• The type of car insurance policy you choose

• Age of the policyholder (drivers below 25 years may need to pay a high excess) 

Adjusting your excess lower or higher is possible, but this will change regular insurance premium payments.

2. What Is The Objective Of An Excess?

The purpose of excess is to prevent people from making frequent claims or making claims for too small damages. As the policyholder has to pay it on their own when making a claim, they will consider excess when weighing up whether or not to submit a claim.

Without excess, the insurer would need to deal with many claims for a tiny scratch, bump, or dent that needs repair. These damages would incur a high administrative cost concerning the claim value, and they would also cause the insurance cost to skyrocket. The hefty premiums could burn a hole in your wallet.

When policy owners must pay the first part (excess) of each claim on their own, this prevents countless smaller claims for minor repairs. 

Introducing financial protection only for specific situations helps keep insurance premiums less expensive.

3. Types Of Excess In Car Insurance

You can classify excess car insurance as the following:

Standard Excess

Some policies have the excess as a compulsory component, regardless of cost or conditions. Policy owners have to contribute toward the claim cost.

The standard excess is the amount you have to pay for all your claims unless your insurer considers it a "no-excess" or "no-fault" claim. 

The following factors determine the excess amount such as:

• Your location

• Your car's condition

• Your policy type

• Your claim history

Voluntary Excess

As the name suggests, there are some policies wherein the policy owner has the freedom to pay a certain amount on top of the standard excess. Voluntary excess is the additional voluntary amount that insurers allow you to pay for a cheaper car insurance premium.

Insurers offer a cheaper premium price to people with a higher voluntary excess. For example, a policy with a $500 excess will have a higher premium amount when compared to one with an excess of $1,000.

When an insurance provider offers you a quote, you can lower or lower your excess and change your premiums.

The Age Excess is an addition to the standard excess. You may also need to pay an additional excess as "Age Excess" if the car driver who drove or used the car at the time of the incident was below 25. 

This excess is also applicable to learner drivers. The excess amount can be lower when the driver is on the policy.

Inexperienced Driver Excess

Suppose the driver is 25 or above and has held their driving license for two years. In that case, they need to pay for an additional "inexperienced driver excess" with standard excess at claim time. 

This excess is also applicable to learner drivers. However, adding the driver to the certificate of insurance can help reduce the excess amount. So, if you have inexperienced drivers who regularly use your car, you should list them on your policy.

Driver History Excess

This excess applied when a driver's license was suspended, cancelled, restricted, or disqualified. It must have happened in the past three years before the insurance period started, and he was driving/using the car at the time of the accidental event.

Unlisted/ Undisclosed/ Non-Nominated Driver Excess

Some insurers impose an additional excess on policyholders who are not in the policy and are involved in a crash that needs a claim settlement.

Windscreen or Glass Excess

Some insurance service providers levy a specific excess for window glass or windscreen claims.

However, many provide an option to lower or waive this excess, provided that the insured pays an extra premium. 

Not all of the above excesses need to apply to your policy. You should consult your insurer before signing up to know about all applicable excesses.

4. When Do You Pay Excess On Car Insurance?

You will be liable to pay the excess if a car accident has happened due to your mistake. 

Additionally, you may also need to pay your standard or voluntary excess to repair your car when:

• You collide with an animal

• Come across the theft or an attempted car theft

• Your car gets damaged due to fire or weather events such as hail, flood, storm

• Any other incidents specified by your insurer

Consult with your insurer or read the policy wording to get a precise idea of when to pay insurance excess.

5. Who Does Not Need To Pay The Excess?

You don't have to pay an excess if the accident is considered a no-fault accident and you meet the conditions outlined by your insurer.

A "No-Fault" accident fulfils the following conditions:

• If another person or another vehicle driver was responsible for the accident

• If you (the policy owner) can provide the personal and vehicle details of the driver at fault. This includes full name, address, and vehicle registration number, to claim the repair costs or the insurer of the person.

According to the Australian Financial Complaints Authority, you can delay paying an excess if you demonstrate that you are experiencing financial difficulty. 

In this case, your claim will be lodged and processed, and you can pay for the insurance excess within the time agreed by the insurer.

6. When Do I Need To Pay Multiple Excess On My Policy?

Some claims don't require paying an excess, while others attract more than one excess besides a standard/ voluntary excess. It usually depends on the following conditions of the claim:

• Your car is written-off

• Collision of your car by/with an animal

• Fire or weather events damaged your car

• If your car driver is less than 25 years old (then both an age excess or inexperienced driver excess and standard excess are applicable)

• You are at fault for the accident, or the "at-fault" party can't be identified. 

• Malicious act or sabotage

• Any car damage caused by an unidentified person/driver while your car is parked.

• You are claiming for different incidents, or even under other policies such as car insurance and home insurance policy at the same time (hitting the car accelerator in place of the brake and accidentally driving it into your home)

It is important to note that the excess applies to each accident that leads to a claim, either individually or in combination, based on the circumstances.

When lodging a claim, you must check the "Certificate of Insurance" to learn about all excess types you might need to pay.

7. When Is A Car Insurance Excess Paid?

When the car is damaged, the insurer will pay you a total loss settlement (based on the present market value) after deducting the excess amount.

However, the insurer will ask you to pay your car insurance excess before commencing the repair work if the car is repairable.

Suppose the insurer settles your claim under the "New Car Replacement benefit". In that case, it will pay the excess before replacing the car.

8. Do I Pay The Excess If I Damage Another Car?

You may need to pay the excess if the damage is your fault. Together with the standard/voluntary excess. The insurance company may consider other types of excesses, such as:

• Age excess (when you are below 25 years)

• Inexperienced driver excess (if you have held your license for below two years)

• Driver history excess (if you have a history of reckless driving)

Thus, depending on the above incident circumstances that led to your claim, you may need to pay your Basic Excess and applicable additional excesses.

9. How Much Is Age Excess In NRMA?

With NRMA car insurance policies, an age excess is only applicable when the driver is below 25 years and has had a provisional license for under two years. The excess amount payable can get reduced when the driver is on the policy. This applies only to the following states: NSW, QLD, ACT, and TAS.

For policies taken out in WA, NT, and SA, the insurance company adds an age excess when the driver is below 25. There is no need to pay this excess when the policy mentions the driver. Click here for more information.

10. What To Consider When Deciding On Car Insurance Excess?

The following pointers will help you determine the right excess for your car insurance.

• Does a higher excess lower your car insurance premium?

• Are you financially capable of paying the higher excess if you have an accident?

• Does the same excess apply to the policy owner and any other person driving your car?

• What is your driving history, and what other drivers do you nominate on your policy?

• How costly is it to repair your vehicle if you encounter an accident?

• How often do you drive/use your car?

11. What Is Basic Excess Insurance Meaning In Car Insurance?

The Basic Excess amount is the minimum you need to pay to settle an at-fault car insurance claim. The amount depends on the state or territory where your car is present when submitting a claim.

You can reduce your excess by increasing the policy premium and vice-versa. As a general guide, the primary, excess ranges from around $200 to $700 but could be lower or higher based on your situation.

Based on the conditions of the accident that resulted in a claim, you may require paying for multiple excesses on top of the Basic Excess. Some of these include:

• The driver is below 21 years old 

• The driver hasn't held an unrestricted and full Australian license for two years or above

• The driver's name is not on the insurance certificate

• The car driving limit (in kilometres) has exceeded the specified limit with an invalid or no reading.

12. Can I Change The Excess For My Car Insurance Policy?

The decision depends on you, your budget, and what selection you think will give you the best value for money. You can increase or decrease the Basic Excess but not the additional excess applicable for any claim.

A higher Excess can reduce your policy premium and vice versa. It may pressure your budget when making a claim. Still, it will reduce your overall policy premium and make the coverage more affordable.

Choosing higher excess could benefit you if you are a safe driver and have a clean driving history.

While lowering the excess lessens the financial strain at the time of claim but increases your policy premiums. Regardless of your option, make sure you can pay premiums whenever they are due and pay the excess at the time of claim without any substantial financial burden.

13. How Do I Pay An Excess?

Your insurer needs you to pay for the excess in full before it provides you with the policy benefits or settles your claim. The mode of payment for excess depends on the insurance provider and the claim type.

When filing a claim application, your insurer will instruct you on how you need to pay the applicable excess. Here are the three common ways in which most insurer asks for excess payment:

• It gets deducted from the claim amount payable to you

• You need to pay it to the insurer

• When collecting the car, you need to pay the appointed vehicle repairer.

14. Can I Pay My Car Insurance Excess In Instalments?

Usually, you are supposed to pay for excess as a lump sum and not in instalments. However, if you are undergoing financial hardship and can't pay the excess, you can request your insurer to assist.

In some circumstances, insurers agree to increase the excess payment term for policy owners and allow them to pay it in instalments. You can even ask your insurer to subtract the excess from your payout.

15. Insurers With Low Excess On Car Insurance

Here are the top insurance providers that offer low excess to help policy owners save more over time:

16. Conclusion

Car insurance is essential but can also be highly complicated. Understanding Insurance excess is vital as it could be your out-of-pocket expense if you need to make a claim. 

We hope this blog has made it easier to understand what an Insurance excess is and its necessary part in the insurance claim process.

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