Could somebody please explain to me what “excess” means in terms of insurance?
There are two types of excess. Compulsory excess, which everybody has built in to the policy, and voluntary excess, which you can add on to the compulsory excess to reduce the premium. The higher the excess is, the lower your premium will be. The excess is the amount you will pay in the event of a claim. If your total excess is £250, and you make a claim for £1000, the insurer will give you £750 and it is up to you to pay the balance of £250. If the excess is £250 and your damage is £200, you cannot claim, as the payout is less than the excess. It is a way of reducing the number of small claims made to the insurer. Before it was introduced, insurers used to get claims for £5 for a broken wing mirror. They would spend more than £5 in administration costs when they processed the claim, so excess was introduced.
