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16. Together Mutual Insurance: excess explained

“I know most insurance policies have an excess, but what is it?”

It’s the sum of money that you’re agreeing to contribute towards the overall cost of a claim. For example, if you’re making a claim for £500 and you have a £100 excess, the insurance provider will pay £400 as you pay the other £100.

“Why is it there?”

Essentially, it’s there to keep insurance premiums more affordable for everyone. Insurers charge an excess to discourage small claims, where the administrative cost of dealing with the claim is more than the actual value of the claim. If it wasn’t there, the number of claims would increase dramatically and the cost of insurance would have to rise as a result.

“Why do some policies include different standard excesses for claims?”

Again, it’s to keep costs under control for customers. Escapes of water or subsidence, for example, are among the most expensive claims and the excess for these claims reflects that so that we can keep the cost of policies lower.

“Do all policies have an excess?”

All our policies include excesses for escape of water and subsidence. It’s a good idea to check the small print on a policy before you take it out so you know exactly what you will be charged for on the premium and in the event of a claim.

“What’s the difference between standard and voluntary excess?”

Each policy will normally come with a standard excess and the option to add a voluntary excess if you wish to. Standard excess is compulsory, it is the minimum amount set by your insurer that you have to pay towards the cost of your claim. For example, if your TV was stolen and you made a claim for £500 and your compulsory excess was £50, you’d get £450. Voluntary excess is the additional amount you choose to pay towards your claim. You set this amount when taking out your policy and it can reduce your premiums, but it means when you make that £500 claim for your TV, if your compulsory excess is £50 and your voluntary excess is £50, you’ll only be getting £400 back. You set the level of your excess, but you’ll need to carefully assess your policy. If you can’t afford to cover a large lump sum in one go then it might be better to choose a lower limit with slightly higher premiums.

“If I choose a higher voluntary excess, will my insurance premium be lower?”

Yes, in most cases – but it’s always worth checking to make sure. It might sound obvious, but while it may seem like a good idea to increase your excess to get the cost of your premium down, be sure you can afford to pay it if you do have to make a claim.

We know insurance isn’t the most exciting topic, but making sure your home and contents have the right amount of cover is important so it’s worth making sure you get it right. We’re always happy to talk you through your policy or answer any questions you have – just give us a call on 01438 761 670.