The what, the why and the how of car insurance excess.
Don’t let the word “excess” leave your palms sweating. It may seem like a vague and unsettling term, but we’ve got all the details to help you understand, choose and appreciate the real work that your excess does for you.
So let’s demystify the purpose of excess.
What exactly is Excess?
When buying insurance, you’ll be asked to choose an excess amount. Excess is the amount that will come out of your pocket when you claim from your car insurance.
For example, let’s say you have an excess of R5 000, something happens and you have to claim for R100 000. Because the claim amount is more than your excess amount, you will have to pay the R5 000 and your insurer will contribute the remaining R95 000.
On the other hand, let’s say you scratch your car with a trolley and you have minor damage of R3 000. In that case, because the repair cost is less than your excess amount of R5 000, you wouldn’t submit a claim to your insurer and the R3 000 repair would be for your own account.
Do I always have to pay the Excess? Even if the accident was not my fault?
Yip, you will always be responsible for the excess amount on any claim.
Some minor claims however, could have zero or no excess, dependent on your insurer. At Naked, for example, glass or windscreen claims have zero excess if the repair or replacement cost is less than R2 000, and a maximum excess of R1 000 if the cost is over R2 000.
Even when someone else is in the wrong, the excess will still be your responsibility, but hopefully only for a short time. A recovery from a responsible third party typically follows a legal process. If you have a good insurance provider, they’ll expedite that legal process, and if the other person is proven to be at fault, your insurer will recover the cost of the claim from them and then repay your excess.
So why not just pick a low excess to ensure that your insurer will pay out for every claim?
Well, because your excess amount has an impact on your monthly premium. A higher excess amount will result in a lower monthly premium, while a lower excess amount will leave you with a higher monthly premium. Below are some pointers to consider when choosing your excess.
How should I choose my Excess?
There are lots of things to consider, but the following five things will go a long way in helping you to make that decision:
1. What is my car worth?
We don’t think it really makes sense to select an excess of R20,000 if your vehicle is worth R30,000, right? If your excess is close to the full value of the car, the value of the insurance becomes doubtful. So a common rule of thumb (as also suggested by an IOL article) would be to aim for an excess lower than 10% of the insured value of your car.
2. How much free cash can I put my hands on in an emergency?
The less free cash you have, the less likely you will be able to pay a high excess. Remember, the reality is that accidents do happen. You could be the best driver in the world, but that doesn’t mean everyone else on the road is. And if you don’t have the excess amount available when that day comes, your car is at risk of not being repaired. This might tempt you to put your excess as low as possible, but don’t forget the lower the excess, the higher the premium.
3. What monthly premium will not break the bank?
Saving at claims stage always needs to be weighed against the increased monthly cost that goes hand-in-hand with a lower excess. So make sure that you balance the affordability of the monthly premium with your ability to pay your excess at claims stage.
4. How often do you use your car?
If you drive your car less often than most, you might be more comfortable selecting a slightly higher excess, because your chance of a small claim is less likely than the Average Joe.
5. Are there any additional excesses that could come into play and ruin your budgeted amount?
Traditionally, factors like your age, whether or not the accident involved another car and even the time of day at which the accident took place can affect your excess amount at many insurers. You may be required to pay an excess higher than you thought. These additional excesses are often referred to as ‘hidden excess’ as they are hidden so deep in the small print, and make it difficult for you to budget correctly to ensure you’ve got the cash when you need it. This ‘tactic’ of some insurers forces you to really have to dig into the details before you commit. Luckily, this is where Naked comes in.
Naked’s excess is different.
Us? Well, we have a business-wide no-surprise policy, but especially when it comes to excess. That’s why we work to offer insurance that reduces uncertainty, with no nasty surprises when you try to claim. This philosophy links to our fixed excess offer.
We offer a fixed excess, ranging between R1500 and R20 000, which is nothing beyond what you’re expecting. You can also change your excess during our online quoting process, or anytime thereafter on our app to instantly see what the effect is on your premium. The excess amount you chose, is the only amount you’ll have to pay, regardless of when the accident happened or who was involved. Our no-surprise policy guarantees that we don’t have hidden excesses in our small print that pop up at claim stage. This allows you to accurately budget for your car insurance and sign up for a policy that you can genuinely afford.
So there you have it. There’s simply no need to let a little excess leave you with a lack of sleep.