The excess is the amount you agree to pay towards any claim - and, within reason, the higher the excess, the lower the premium. So, if you put in a claim for £500 and the excess is £200, the insurer will only pay out £300.
If you are considering making a small claim, it may therefore be worth considering paying for any repairs yourself instead - especially if you stand to lose a no-claims discount.
The excess has two parts - the mandatory excess (which is set by the insurer, usually at £50 or £100) and the voluntary excess (which you choose yourself). It's important not to volunteer to pay an unrealistically high excess that you couldn't afford to pay if you subsequently made a claim - it means you'll basically be insuring yourself up to that level.
What's more, insurers only reduce premiums to reflect a higher excess up to a certain point. If you set the voluntary element beyond a certain amount - say, £500 or more - it will have no impact on the premium.
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