What is an insurance excess?

The excess is an amount of money that will come out of your pocket when you claim against your car insurance. For example, if you have an approved claim of R100,000 and your excess is R5,000, you will pay R5,000 and the insurer will pay R95,000. If your excess is R5,000 and the cost to repair to damage to your car is less than R5,000, you will need to pay the full amount.

Why do insurers charge an excess?

The excess is a way for insurers to ensure that the cost of premiums remains affordable. Without an excess, insurers would need to process high volumes of small claims, which in turn would mean it would be necessary for them to charge higher premiums.

• Excesses lower the insurer’s administrative costs since customers won’t claim for every small scratch or ding to their car. This is important for traditional insurers, who need to run large back-office teams and infrastructure to handle claims.
• They give customers a financial incentive to take care of their vehicle, since they will also need to pay towards repairs if they’re involved in an accident.
• They discourage people from making multiple claims that could reflect badly on their claims history.

Why should you look out for in the fine print about excess payments?

Often, signing up for lower monthly premiums for car insurance will mean that you will need to pay a higher excess in the event you need to claim.

Most insurers are transparent about the basic excess, which may be up to 10% of the value of the damage to your car in an accident or of the total value of the car if it is stolen or written off. However, many insurers also impose extra excesses if any of the following are true: