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The concept of excess frequently stumps the best of us. What is insurance excess, exactly. and why do we have to pay it? How much do we have to pay? And more importantly; how can we get out of paying it altogether?
Basically, excess is an additional payment you agree to pay before the insurance company settles the rest of your claim. Your car is damaged in an accident or a collision, you put in this much money (the excess) and then the insurance company pays out the rest. The insurance company will always cover the much-greater portion, and the amount you end up paying will add up to a fraction of the cost in comparison.
But, why are you paying this excess to begin with? You already pay your monthly premiums to insure yourself from loss or damage, so it might not make much sense, right?
Well, insurers want us to pay excess because, for the most part, it discourages any attempts at fraud. If a person is forced to make that first payment themselves, they’re far less likely to make a fraudulent claim. It also deters us from claiming for small little problems. It’s pretty much as simple as that.
Of course, if you’re what they call a risk-adverse type of person and you don’t want to pay any excess at all, or a lower excess, that option is possible, but your monthly premium payments will likely be significantly higher. Alternatively, you could pay voluntary excess, which means higher excess payments in order to enjoy lower monthly premiums.
There are many types of these payments, though, and it’s a lot to get your head around while looking for the right policy. In this article, we’ll help you navigate the minefield. We’ll show you what to ask your insurer or broker, what to look out for, and we’ll give you some tips on making excess easier to manage.
There's a lot that the average consumer doesn’t know about excess payments, so it’s important to speak to your broker or insurer to find out exactly which types of excess you may find yourself liable for.
For instance, if you’re involved in a no-fault accident (meaning that it wasn’t your doing at all), then you'll probably still end up paying excess for the damage to your own car. The person who was actually guilty of causing the collsion won’t be responsible for paying the excess on both vehicles. This is because every policy holder is responsible for paying the excess payments on their own policy, and in such a case, the guilty party will have to reimburse your payment afterwards. You’ll have to follow up with your insurer to make sure they do refund you that excess, as well as reinstating any bonus or no-claims discount you may be entitled to. If that guilty party isn’t insured and you are, you’ll still have to pay your own excess. It’s highly unlikely that you’ll ever get that money back and you’ll probably lose your no-claims bonus too.
Bear in mind that less than 30% of the cars on our roads are insured. If owning third party insurance was a minimum legal requirement as it is in many other countries, all guilty parties would be liable for their own costs. If everybody owned insurance, premiums and excess would probably be a lot lower, too.
You may also find that you have to pay more than one excess payment on a single claim. Factors which could determine this includes whether or not you have a bad claims history or if you fall into an age bracket with a higher frequency of accidents, such as a single twenty-five year old male. From Randfontein. On a Friday night.
The aforementioned types of excess may seem like a total headache, but they are still fairly common and many policyholders understand exactly how they work. There are many other types of excess, though, which few people even know exist.
These could include excess in which you may be charged if an accident occurs at a certain time, such as between midnight and five in the morning. You may also have to pay additional excess in the event of your car being stolen or hijacked if you’ve claimed for the same type of incident twice in a 12-month period, or if the incident occurred outside of SA borders.
Your licence also has a lot to do with it. Did the incident occur while a learner driver was driving? Was it not the regular driver? Have you had your licence for less than two years?
You may also end up paying additional or higher excess if you’ve never had insurance before, or if you’re within the first three months of your cover. It’s critical to speak to your insurer or broker and ask them what kind of excess payments you may be liable for. You also get something called an excess buster, where your insurer may allow you to make additional or higher payments every month and then waive the excess should the time ever arise for you to claim.
Worth looking into.
First and foremost, you need to be aware of where you fall in on the risk spectrum. Where you stay, where you work, your age, gender and whether you’re married or not will all factor into this. As mentioned before, an unmarried young man living in an area prone to highjacking will naturally be high-risk. Therefore, when you need to claim, you can expect the excess to be higher than that of older, more experienced, risk-averse motorists.
FURTHER READING: How Is Your Car Insurance Premium Calculated?
More often than not, in cases of smaller accidents, the excess may even be higher than the value of the claim. If you’re going to be paying up anyway, it may be better to have that part replaced yourself. Even smaller claims affect your no-claim bonus, so you need to really think about it and consider whether or not it’s worth the claim.
Keep a no-claims record for three or more years and you’ll enjoy the benefit of lower rates. Speak to a qualified broker and find out what kind of cover you can get. Comprehensive cover naturally costs a lot more than say, third party, but it is well worth it. Always compare insurance quotes to find the policy which suits you best.
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