Excess Levels: Choosing Between Compulsory and Voluntary
Most policies carry two excesses that add together. The compulsory excess is fixed by the insurer based on the risk. The voluntary excess is the additional amount you elect to carry.
When a claim is settled, both are deducted. A policy with a compulsory excess of 250 and a voluntary excess of 250 means the first 500 of any claim is yours.
Why raising it reduces the premium
Insurers price on expected payout. Every additional pound of excess is a pound they will not pay on any claim, so the expected cost falls and the premium follows.
The reduction is largest at the lower end. Moving from zero to a modest voluntary excess produces a noticeable saving; increasing it from high to very high produces progressively less, because claims of that size are rare anyway.
This means there is usually a sensible middle point, and pushing the excess to the maximum available rarely returns proportionate value.
The affordability test
The only question that matters is whether you could produce the combined excess at short notice, without borrowing.
A high excess that would go on a credit card converts a premium saving into interest, and the timing is bad — you are paying it in the same month you have a damaged car or a flooded kitchen.
Keep the combined amount in accessible savings rather than notionally available. An excess you cannot fund on demand undermines the policy at the moment it matters.
Where compulsory excesses are raised
Insurers increase the compulsory excess for factors they consider higher risk: young or inexperienced drivers, certain occupations, recent claims, or specific perils.
Property policies frequently apply separate higher excesses for particular causes — escape of water is common, and subsidence excesses are typically very high.
Read the schedule rather than assuming a single figure applies. A policy advertising a modest excess may carry a much larger one for the peril most likely to affect you.
Percentage excesses
Some property policies apply an excess as a percentage of the sum insured rather than a fixed amount, particularly for storm or flood perils in exposed regions.
Two percent of a substantial rebuild value is a large number, and households frequently do not calculate it until they claim. Work out the actual figure in money before accepting the policy.
Practical approach
Set the voluntary excess at a level you could pay comfortably tomorrow, then compare quotes at that same level across insurers.
Comparing a low-excess quote against a high-excess one tells you nothing useful, and comparison sites default to different levels unless you fix them.
Review it when circumstances change. An excess that suited a household with savings may not suit the same household after a large expense.
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