Excesses can be expensive

Excesses can be expensive

When choosing a car insurance company to cover your vehicle, there are various factors to consider depending on your unique profile.  Regardless of who you are and what you drive there are certain standard tell-tale signs to look out for when choosing a quality, dependable car insurer.  Sometimes cheaper monthly premiums could mean a very unpleasant and costly claims experience.
Shopping around for car insurance could mean significant monthly savings.  To help you pick a reliable insurer that meets your needs AND budget, we will be posting a series of articles on various topics and adding handy tips.

In Part 2 of the series we discuss excesses.

What exactly is an excess?

An excess, sometimes called “First amount payable”,  is an agreed amount of money that the insured is liable to pay in the event of  car insurance claim been settled. I.e. if the excess on your car is R2, 000, and the damages amount to R10, 000;  the insurance company will pay the remaining R8, 000 once the client (the insured) has paid the excess to the repairer. If the damages amount to less than the excess, the full cost of the damages will be for the account of the insured.

Why do insurers have excesses?

An excess is an effective tool as it minimises administratively expensive small claims and imposes a duty of care on the insured.

Generally there are three types of excesses:

  • Standard excess – this is a compulsory excess which is either a fixed flat excess or a percentage excess linked to the value of your car insurance claim.
  • Additional excess – if applicable this excess is payable over and above your standard excess. Typically an additional excess would apply when the driver is younger than 24 and not noted as the regular driver.
  • Voluntary excess – your insurer may give you the option of a voluntary excess. Normally the insured would opt for a higher voluntary excess in exchange for a lower monthly premium, but at what cost?

Consider the following:

  • Can you afford the agreed excess should you need to claim?  Don’t opt for a high excess if you don’t have disposable cash.
  • In the case of percentage and additional excesses, do you know what amount of money these percentages translate into?
  • Does the prospective insurer have multiple excesses linked to a single claim where for example they will charge you an excess on your vehicle and building in a situation where you crashed your vehicle into your own gate?

Try and choose an insurer whose excess amounts are fixed and clearly explained before you buy a policy. If you choose to, they will increase your excess to make your monthly premium more affordable.

For more tips on choosing a reputable insurance, look out for the rest of the articles in this series: How to choose an insurer.   Next topic:  car insurance Claims – avoid headaches at claims stage …

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