How Excess Affects Your Car Insurance Premium

Ever looked at an insurance quote and wondered, 'What’s with this excess thing?' Well, never fear, Hippo.co.za is here to demystify car insurance excess and show you how you can balance it with your premiums to make sure your ride stays protected without breaking the bank.

What Is Car Insurance Excess?

You’ve bought yourself a brand-spanking-new car. To keep it safe on the road and save yourself any financial headaches if anything goes wrong, you’ve decided to take out a car insurance policy.

As you’re going through the paperwork, though, one word catches your eye: 'excess'. Mainly because it’s followed by a number that’s quite a bit bigger than your monthly premium payments.

Excess, whether it’s for your car insurance or other policies, is the amount of money that you agree to pay out of your own pocket when you make a claim. You need to give your insurer this amount before they'll pay out, or you’ll need to pay it before collecting your car when repairs are complete.

Car Insurance Excess

The share of the bill that you’re responsible for paying to repair or replace your car if it gets damaged, destroyed, or stolen. If one of these scenarios happens, the insurer will pay out, minus the excess due.

Different Types of Excess

• Compulsory excess: This is the minimum amount that you’ll have to pay when you make a claim on your insurance policy. It’s set by your insurer.
• Voluntary excess: When negotiating the terms of your insurance policy, you can choose to pay in more than the compulsory excess amount—this is called the voluntary excess. It can lower your monthly premiums.
• Additional excess: This is an extra amount that you might have to pay depending on the circumstances around your claim, such as age or length of policy.

Why Do We Need Excess?

Excess serves several important purposes in the insurance world:

• Discourages fraudulent and frivolous claims.
• Reduces administrative costs for insurers.
• Helps keep monthly premiums lower by reducing claim costs.

Excess and Car Insurance Premiums

Excess and premiums are like a seesaw. When one goes up, the other goes down.

If you opt for a lower excess, your monthly premiums will likely be higher. Choosing a higher excess can lower your monthly premiums.

Higher Excess vs Higher Premiums: Pros and Cons

Pros	Cons
Lower upfront costs when claiming.	Higher costs over time with frequent claims.
Lower monthly premiums.	Higher upfront costs when claiming.
Great for low-risk drivers.	Bigger financial burden when claiming.

How To Choose the Right Level of Car Insurance Excess

Factors to consider:

• Finances: Balance between upfront cost and monthly payments.
• Risk tolerance: How comfortable you are with higher one-time payments.
• Claims history: How frequently you expect to claim.
• Vehicle usage: How often your vehicle is on the road.

Tips for Managing Excess

Here are some tips to balance premiums and excess:

1. Practice safe driving to lower risk and potentially reduce excess.
2. Regularly review and adjust your insurance policy.
3. Compare quotes annually to ensure you’re getting the best deal.

Understanding the balance between excess and premiums is crucial for financial peace of mind. Compare quotes online with Hippo.co.za to find the best car insurance policy that fits your needs and budget.