Most insurance policies require the insured to bear an initial amount of any claim. Adjusting it changes the premium, and the trade is calculable.
This describes how the mechanism works rather than advising on any policy.
How it works
The excess is deducted from any settlement, so a claim below it produces nothing and a claim above it is reduced by that amount.
A higher excess means the insurer expects to pay less, both because some claims fall below it and because all claims are reduced, which is why the premium falls.
The relationship is not linear, and the premium saving from increasing an excess diminishes as the excess rises.
Compulsory and voluntary
A distinction that appears on many policies.
A compulsory excess is set by the insurer and cannot be changed.
A voluntary excess is chosen by the policyholder and reduces the premium.
The total payable on a claim is generally both added together, which is frequently missed when comparing quotes and produces an unpleasant surprise at claim time.
Doing the arithmetic
The calculation that determines whether increasing it is sensible.
Compare the premium saving against the additional amount you would bear on a claim.
An increase that saves a modest amount annually while adding substantially to the claim cost only pays if claims are rare enough.
Which means the question is how frequently you expect to claim, and for most people across most policies the honest answer is very rarely.
Which generally favours a higher excess, subject to the constraint below.
The constraint that matters
Affordability at the moment of a claim.
An excess is only sensible if you could actually pay it without difficulty when something happens.
Setting a high excess to reduce a premium, and then being unable to afford it after an incident, defeats the purpose of holding insurance entirely.
Which means the excess should be set against available accessible funds rather than against the premium saving alone.
Where excesses vary within a policy
A detail worth checking.
Many policies apply different excesses to different claim types.
Motor policies commonly apply a higher excess to glass claims or to young drivers. Home policies frequently apply a separate and substantially higher excess to subsidence or escape of water.
Which means the headline excess may not apply to the claim you actually make, and the schedule lists them.
Checking that schedule before buying, rather than after a claim, is the sensible sequence.
Excess protection products
Sold alongside policies and worth assessing.
These reimburse the excess after a successful claim, for an additional premium.
Which is insurance for the deductible on insurance, and the arithmetic is generally poor since the insurer is pricing it to be profitable on the same claim frequency you are betting against.
They can make sense where the excess is genuinely unaffordable, in which case a lower excess on the main policy is usually a cleaner solution.
The claim decision
Where the excess interacts with something larger.
Making a claim generally affects future premiums, sometimes for several years, and affects any no-claims record.
Which means a claim slightly above the excess can cost more over subsequent years than paying for the damage directly.
The calculation involves the settlement net of excess, against the likely premium increase over the period, which insurers do not volunteer and which brokers can estimate.
Notifying an insurer of an incident without claiming is generally required by the policy terms regardless, and failing to disclose can affect future cover.
What to check at renewal
A short list.
Whether the excess has changed, since insurers adjust it and it is easy to miss.
Whether the compulsory element has risen.
Whether the special excesses for particular claim types are still acceptable.
And whether the voluntary level still matches what you could comfortably pay, which changes as circumstances do.
Underinsurance and averaging
A separate mechanism that can reduce a settlement substantially.
Where a policy insures a property or contents for less than the full value, some policies apply an average clause reducing any settlement proportionally.
Which means a claim well below the sum insured can still be reduced if the total value was understated.
Rebuilding cost rather than market value is the relevant figure for buildings cover, and the two differ substantially in both directions.
Reviewing sums insured periodically, particularly after significant purchases or building work, addresses it.
Claims history and disclosure
Which affects future cover regardless of the excess decision.
Insurers generally ask about claims and incidents over a defined period, and shared industry databases mean the information is verifiable.
Non-disclosure can result in a claim being declined or a policy voided, which is a considerably worse outcome than a higher premium.
Incidents that were not claimed generally still require disclosure where asked about, which is the specific point most often missed.
Answering the question actually asked, fully, is the protection.