How much voluntary excess should I pay on car insurance?

Almost every insurance policy comes with excess. It’s how insurers protect themselves against fraud and false claims. But while the amount of compulsory excess you pay is set by your insurer, the voluntary excess you pay is up to you. If you’re wondering, “How much voluntary excess should I pay on car insurance?” we’re here to help.

We’ve already written a full guide on what excess is in insurance. Please turn to it if you’re looking for a detailed explanation on insurance excess, including why it exists, how it works, and when you have to pay it.

Below, we’ll look into the factors you should consider as you decide on the right amount of voluntary excess to pay. Let’s start by defining this type of insurance excess.

What is voluntary excess?

As the name suggests, voluntary excess is the amount of money you pay voluntarily towards your insurance claim if you have an accident. It’s different to compulsory excess, which is a mandatory amount that your insurer sets.

Your insurer will decide what your compulsory excess should be by assessing your individual circumstances and what they consider to be your level of risk. This is determined by factors like your age, driving history, claim history, the type of vehicle you drive, and where your vehicle is parked. It varies from policy to policy.

Voluntary excess, on the other hand, is the amount that you choose to add to your compulsory excess. Increasing your excess usually lowers your monthly premiums. But it also means that, in the event of a claim, you will need to pay a larger amount upfront. It’s therefore important to agree to a compulsory and voluntary excess total that you can afford.

The total excess is often deducted from the final amount your insurer pays out to you when your claim is settled. However, some insurers may ask you to pay the excess directly to them, or to a contractor involved in repairing your vehicle. It’s therefore a good idea to always have this amount readily available in your savings.

How much voluntary excess should I choose?

The amount of voluntary excess you choose is entirely up to you. It can be zero if you wish. The maximum voluntary excess amount you can pay, however, will usually be set by your insurer.

If you do decide to pay voluntary excess, the amount you agree to pay should depend on several factors, including:

• Your financial situation: How much you afford to pay if you need to make a claim? For example, if your compulsory excess is £300, and you add an additional £200 voluntary excess to this amount, would you be able to pay it in full unexpectedly? If you choose a high voluntary excess, you need to have enough savings to cover this amount relatively quickly without causing any financial strain.

• The cost of your premiums: Almost always, paying a higher total excess will lower your insurance premiums. If you would like to pay less for your insurance on a monthly basis, you might want to choose a higher voluntary excess. But once again, the savings you make on your premiums should be weighed up against the risk of having to pay a larger sum in the event of a claim.

• Your appetite for risk: Are you comfortable with unexpected financial costs, or do you prefer more predictable expenses? It’s worth considering your appetite for risk as you come to a decision.

• Your driving habits: If you’re a careful driver and have a low risk of making a claim, you might opt for a higher voluntary excess to benefit from lower premiums. If, on the other hand, you drive frequently or in high-risk areas, you might be better suited to a lower excess.

Voluntary excess typically ranges from about £100 to £500, though some insurers may allow you to pay more. You can usually change your voluntary excess. Speak to your insurer if you would like to experiment with raising or lowering it.

So, what does a £500 voluntary excess mean?

A £500 voluntary excess means that you have agreed to pay £500 towards any claim you make, in addition to the compulsory excess set by your insurer.

To return to the example above: if your compulsory excess is £300 and you have agreed to a £500 voluntary excess, you would need to pay £800 in total if you make a claim.

Is it better to have high or low excess?

There isn’t a straightforward answer to whether it's better to have a high or low voluntary excess. Once again, the decision you make will depend on your individual circumstances.

Let’s look at the pros of opting for a high voluntary excess:

• You’re likely reduce your insurance premiums, potentially by a substantial amount.
• You’re less likely to make small claims, which will help to improve your no-claims bonus. Bear in mind, however, that even if you don’t claim for damage to your car, you have to declare any accident you have to your insurer. And you will need to repair any issues that affect your car’s safety or roadworthiness.
• You might be incentivised to drive more carefully knowing you have to pay a higher excess out of pocket.

And the cons:

• You will need to pay a larger amount of money out of your own savings if you claim. This can become very expensive if you have multiple claims in a short period of time. 
• You might have to pay for repairs yourself more often. The cost of coming up with the high excess every time might lead you to deal with smaller damages yourself. Paying for these repairs, as well as for insurance that you’re not using, could affect you financially.
• It might affect your coverage decisions. A high excess might deter you from opting for comprehensive insurance, or other options that provide better overall protection.

Now, let’s look at the pros of choosing a low voluntary excess:

• You’ll have lower out-of-pocket costs if you need to make a claim. This will put you under less financial strain, which is especially important if you don’t have an emergency fund readily available.
• Knowing you have a low excess can provide greater peace of mind, reducing stress and worry about potential high costs after an accident.
• You’re more likely to claim for smaller damages or repairs if you have a low voluntary excess. This can help ensure your car is well-maintained and safe to drive. (This can have a negative effect on your no-claims bonus, however.)

And the cons:

• Your premiums will almost certainly be higher. A low excess will increase your monthly or annual premiums. 
• It might encourage you to make minor claims. This could affect your no-claims bonus and potentially lead to higher premiums in the future.
• You might end up paying more in premiums than necessary if you’re a safe driver with a low risk of accidents.

As you can see, there’s no clear cut answer as to whether it’s better to have a high or low excess. The choice you make is up to you. An experienced broker can help to assess your specific circumstances so that you can make an informed decision.

How much voluntary excess should I pay? The final word

When you make a claim, voluntary excess is an optional amount you choose to pay in addition to your policy’s compulsory excess. It can be as low as zero and go up to a maximum amount that is usually set by your insurer.

How much you should pay for voluntary excess is a personal decision. It depends on:

• Your financial situation: Can you afford to pay a higher excess in the event of an accident, or are you more comfortable paying more expensive monthly premiums? 
• Your appetite for risk: Are you comfortable with unexpected financial costs, or do you prefer more predictable expenses?
• Your driving habits: How often you drive, how you drive, and where you drive will impact the likelihood of you claiming. This should inform your decision-making process.

The expert team at Howden is on hand to talk you through your voluntary excess options in detail. We’ll assess your financial situation, and advise you on what’s best. Contact us today.

Also read:

• Smile, it’s excess protection!
• The price of insurance – higher, lower?
• Car insurance groups [A complete guide]

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