Insurance Policies & Double Excesses

28/06/2011
Claiming on your insurance policy today could actually end up costing you significantly more than you might have originally thought. Not only is it the price of your car, home or travel cover that is increasing, insurance companies are also increasing the charges policyholders have to pay each time they claim.
Claiming on your insurance policy today could actually end up costing you significantly more than you might have originally thought. Not only is it the price of your car, home or travel cover that is increasing, insurance companies are also increasing the charges policyholders have to pay each time they claim.

This charge, more commonly known as the ‘excess’, was typically just £50 and was originally designed to stamp out trivial or frivolous claims. However, these fees have risen dramatically in recent years. Now more than half of all insurers charge a standard excess of over £100, compared to just a third of that three years ago.

More concerning, it is now becoming commonplace for some insurers to charge more than one excess per claim – so be sure to investigate this before taking out a policy. Around eight in ten policies now apply an excess for the individual sections of your insurance cover – and in some cases this will be applicable per person too.

Some car insurance policies have what is called a ‘compulsory excess’ which must be paid in all scenarios, whereas a ‘voluntary’ excess only applies if the policyholder has previously opted to include this. Compulsory excesses are usually much more common for policies insuring young or inexperienced drivers, with drivers under 21 facing excesses of anything up to £500.

When it comes to excesses and browsing online, there is a fundamental factor to watch out for. Many sites will enable you to ‘set’ the excess you are willing to pay before they produce quotes for you. However, this usually only refers to the voluntary excess, which is an optional over and above the compulsory excess already set by the insurer. Therefore, if you have chosen an excess of £50, you could end up with a policy with a £200 compulsory plus a £50 voluntary payment on top! Not surprisingly, as a result the Financial Ombudsman Service receives hundreds of complaints regarding excesses every year.

So why have excesses gone up? Increased excesses are an easy way of keeping prices lower than they otherwise would be. Costs of motor insurance have increased dramatically, so despite the annoyance of discovering additional charges when making a claim, companies are trying to present cheaper policies when you are shopping around.

Be sure to check your policy thoroughly; does it have the cover you need and how much excess will you be required to pay in the event of an accident? Not doing your research beforehand could result in major unforeseen expenses at a later stage.