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When do I pay a car insurance excess?

Why do car insurance excesses exist?

Are there different types of car insurance excess?

Are there any car insurance excess exemptions?

Can I pay my car insurance excess in instalments?

How much excess should I be paying?

Is it worth comparing car insurance for different excess options?

Long story short

An excess is an out-of-pocket cost if you make a car insurance claim

Choosing a higher excess could mean a lower car insurance premium.

Insurers can decide to waive your excess for not-at-fault car accidents

You’ll likely need to provide the at-fault driver’s full name, address and rego to avoid paying your excess.

Multiple excesses can stack up, depending on who was driving

Younger, inexperienced or unlisted drivers can attract additional excess payments.

When do I pay a car insurance excess?

Generally, you pay a car insurance excess when an insurer accepts your claim. An excess is the out-of-pocket cost you agree to pay towards repairs or the replacement of your vehicle, while the insurer covers the rest. Generally, you pay the excess to your insurer or the repairer before or after repairs are done, or, for a total loss claim for a write-off or theft, your insurer deducts the excess amount from your payout.

Here are some fictional examples of how this might work.

Your excess also applies if your car is damaged, but no one is at fault, such as by a weather event, or if the responsible party can’t be identified. If an insured third party causes damage to your car and is identified as the at-fault driver, you may not need to pay an excess, subject to your insurer’s requirements and policy terms.

Why do car insurance excesses exist?

Excesses exist to help reduce the risk taken on by insurance companies when they insure someone. An excess does this by helping ensure that claims are processed only if they cost more than what the policyholder has agreed to pay towards the claim. For example, without an excess, an insurer may have to receive and process claims even for minor scratches and dents, which isn’t necessarily what car insurance is for. So, excesses exist to help share risk between the insurer and policyholder.

But hold on – excesses needn’t just work in the insurer’s favour. Excesses can help make car insurance more affordable. Your insurer may offer to lower your premium if you choose to pay a higher excess. The higher the excess, the less risk is put on the insurer, and the less money they ask from the policyholder to cover this risk.

Important

In some cases, it may not be worthwhile making a claim if the repair cost is less than or close to your excess, as your insurer may not make a payment towards the claim. For instance, if your standard excess is $500 and you want to make a claim for $250 worth of repairs, your insurer will direct you to pay the entire $250 in repair costs yourself.

Are there different types of car insurance excess?

Yes, all policies come with a standard or basic excess, which is what you pay if your claim goes through; and there are other additional car insurance excesses that can apply under different claim conditions. For example, for claims involving a learner driver or a driver under 25, you mayneed to pay an age-based excess on top of your standard or basic excess. Excesses and excess amounts can vary widely depending on your insurance provider, your policy type, your car and even your state or territory. So, it can help to get familiar with the types of excesses, what they’re for and when you need to pay them.

Here are some of the additional excesses you may need to pay on top of your basic excess.

• Voluntary excess: A voluntary excess is what you choose when you want to pay a higher excess amount than just your basic or standard excess. Depending on the policy, this can help lower your car insurance premium.
• Age excess: Some insurers might require you to pay an additional excess if the driver of your car is below a certain age and causes an accident. Usually, this applies to drivers under 25, but it can vary between insurers.
• Inexperienced driver excess: If the driver of your car causes an accident and they have not held their full licence for a certain number of years, then this additional excess may apply.
• Unlisted driver excess: If someone who isn’t listed on your certificate of insurance drives your car and causes an accident, it can often incur an unlisted driver excess.
• Outside odometer excess: If you have a pay as you drive or low-kilometre policy, driving more than the agreed kilometre limit or with a faulty or tampered odometer can result in an additional excess if you make a claim.

Excesses can apply individually or in combination, depending on your personal circumstances and your policy terms. That’s why it’s worth reading your policy documents to find out about the excesses you might need to pay and when you’ll need to pay them.

Are there any car insurance excess exemptions?

Yes, certain types of claims or claim scenarios don’t require an excess. A likely scenario where an excess is not required is if your car is damaged by an insured third party in an accident that isn’t your fault. However, the basis for an excess exemption will depend on your insurer and the terms of your policy. For example, if you’re putting in a not-at-fault claim, your insurer will need the at-fault driver’s full name, residential address and car registration number as part of the process. If not, the claim will be treated as an at-fault accident claim.

Unfortunately, excess exemptions may not apply to claims that involve:

• fire, storm, wind or hail damage
• collisions involving animals
• theft or attempted theft
• vandalism or malicious damage
• an accident where the driver at fault is unidentified or uninsured.

Of course, you’ll still need to check your insurer’s Product Disclosure Statement for the specific details. In some cases, you might have to pay a standard excess (and a voluntary excess, if you have one) for certain claims, but not any additional excesses. It all depends on the terms of your policy.

Helpful tip

With smaller repairs, you might want to consider whether you want to make a claim at all. By the time you pay the excess and factor in potential increases in the cost of future policies due to your claims history, you may be better off shelling out the extra few hundred dollars yourself.

Toby Hagon

Motoring Journalist

Can I pay my car insurance excess in instalments?

Yes, you can often pay your car insurance excess in instalments if you can prove that you’re experiencing financial hardship. That said, in most other instances, you’ll need to pay your excess or excesses whole.

Keep in mind, there’s no legal requirement for insurers to let you pay your excess in instalments. For this reason, it can help to contact your insurer and ask them about your options when it comes to paying your excess.

How much excess should I be paying?

Your car insurance excess amount should align with how much you can afford to pay out of pocket if you need to make a claim. Choosing to pay a lower excess means you’ll pay less if you make a claim. But because it means the insurer takes on more risk, it can also mean a higher car insurance premium. A higher excess means you’ll pay more out of pocket if your claim goes through, but you’ll pay a lower premium because you’re sharing a higher portion of the risk.

When deciding on an excess amount, it also helps to consider how much risk you’re bringing to the table. For example, listing higher-risk drivers on your policy or allowing unlisted drivers to drive your car increases the chances of you paying additional excesses. It’s worth noting that the option to choose a higher excess amount is only available with comprehensive car insurance.

Ultimately, the excess amount you choose to pay is a decision based on your specific situation. Just be sure to read the Product Disclosure Statement for exclusions and conditions of cover and review all the facts from every angle before you make your choice.

Is it worth comparing car insurance for different excess options?

Yes, comparing car insurance for excess options can help save you money. A policy that lets you choose a higher voluntary excess could help lower your car insurance premium, while a lower excess could reduce your out-of-pocket expenses if you claim. And some policies have different excesses – some don’t need you to pay an unlisted driver excess for learner drivers, while others do. When reviewing quotes, you can look at different levels of excess to see what impact they have on your premiums until you find cover within your budget.

Want a head start on your policy search? Use the iSelect comparison tool and weigh up car insurance quotes and features from a range of well-known car insurance brands in Australia. And before you sign up with a policy, be sure to comb through the Product Disclosure Statement for any information you might need on cover details, costs, excesses, exclusions and conditions of cover.