Car Insurance Excess Explained: Compulsory vs Voluntary in the UK

Summary

• Compulsory excess is set by your insurer: You can't change it. It's based on your age, car, and risk profile.
• Voluntary excess is what you choose to pay: Higher voluntary excess means a lower premium — but more to pay if you claim.
• Total excess = compulsory + voluntary: Make sure you can afford the total if you need to claim.

Excess is one of the most important — and most misunderstood — parts of car insurance. Getting it wrong could mean paying hundreds more than you need to, or not being able to afford to claim when you need to.

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What Is Car Insurance Excess?

Excess is the amount you pay towards a claim before your insurance company pays the rest. For example, if your excess is £500 and you have a £2,000 claim, you pay £500 and the insurer pays £1,500.

There are two types of excess, and they're added together:

Compulsory Excess

This is set by your insurer and you can't change it. It varies based on:

• Your age: Young drivers (under 25) often have higher compulsory excess — sometimes £500+
• Your car: More expensive or powerful cars attract higher compulsory excess
• Your driving history: Claims or convictions can increase it

Voluntary Excess

This is the amount you choose to add on top of the compulsory excess. You set it when you take out or renew your policy.

The higher your voluntary excess, the lower your premium. But the trade-off is that you'll pay more out of pocket if you make a claim.

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How Much Voluntary Excess Should You Set?

The right amount depends on your circumstances:

• £0-£100: Keeps your out-of-pocket costs low but your premium will be higher. Good if you claim frequently or have low savings
• £250-£500: The sweet spot for most drivers. Meaningful premium reduction without excessive risk
• £500-£1,000: Significant premium savings but high out-of-pocket cost. Only suitable if you have savings to cover it

Golden rule: Never set your voluntary excess higher than you can comfortably afford to pay at short notice.

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How Excess Affects Your Premium

Increasing your voluntary excess from £250 to £500 can typically save 5-15% on your premium. Going from £250 to £1,000 might save 15-25%.

However, the savings diminish as excess gets higher. Going from £500 to £1,000 saves proportionally less than going from £0 to £250.

Get quotes at different excess levels to see exactly how much you'd save. The difference varies between insurers.

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When Do You Pay Excess?

You pay excess when:

• You make a claim on your own policy: Regardless of who was at fault initially
• Your car is damaged: Accident, vandalism, or weather damage claims
• Your car is stolen and not recovered: Excess is deducted from the payout

You DON'T pay excess when:

• The other driver is at fault and their insurer pays: Though you may pay initially and get it refunded later
• Third-party only claims: If someone claims against you, they don't pay your excess

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Excess for Young Drivers

Young and new drivers face the highest compulsory excess. It's common for under-21s to have:

• Compulsory excess: £350-£500
• Plus young driver excess: An additional £200-£500 on top
• Total before voluntary excess: £500-£1,000

Adding voluntary excess on top of this can mean a total excess of £1,000-£1,500+. Think carefully before adding voluntary excess if your compulsory excess is already high.

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Excess Protection Insurance

Excess protection (or excess waiver) is a separate policy that reimburses your excess if you make a claim. It typically costs £30-£60 per year.

Is it worth it? Do the maths:

• If your total excess is £500 and protection costs £40/year
• Over 5 claim-free years, you'd spend £200 on protection you didn't use
• But one claim saves you £500

It's a gamble either way. If you're a careful driver who rarely claims, saving the money might be better. If you're worried about affording the excess, the peace of mind might be worth £40/year.

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Tips for Managing Excess

• Never set excess higher than you can afford: The point of insurance is to protect you. Unaffordable excess defeats the purpose
• Compare at different levels: Get quotes at £0, £250, £500, and £1,000 to see the real savings
• Consider small claim self-insurance: If your excess is £500 and the repair costs £600, claiming isn't worth it because of the impact on your no-claims bonus
• Check compulsory excess before choosing voluntary: If compulsory is already high, you might not want to add much on top
• Review annually: As you get older and build no-claims, your compulsory excess may decrease

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