What is excess in insurance?

Insurance excess is the amount of money you pay upfront towards any claim before your insurance company covers the rest. Think of it as your contribution when things go wrong. Understanding how excess works can save you a fair bit of cash and hassle down the line. Let’s break it down in plain English.

What does excess mean in insurance?

Think of it as your contribution to the cost when something goes wrong.

Insurance excess is the amount of money you choose when purchasing a policy that will be subtracted from any future claims payouts.

Let’s say your £1,000 laptop was stolen and your excess was £250. If your claim is approved, your insurance company would pay you £750 when you get reimbursed.

At Lemonade, you can choose your contents insurance excess from £100 to £500 (£100, £150, £250, £400, or £500). Think of excess as your participation in any damage or loss – you’re saying “I commit £X to any approved claim for future losses or damages, and my insurance company will cover the rest.”

Types of excess in insurance

There are two main types of insurance excess you’ll come across in your policy documents:

Compulsory excess

This is the minimum excess amount your insurance company insists you pay. It’s non-negotiable – a bit like queuing for the bus, you’ve just got to do it. The compulsory excess varies depending on:

• Your age (young drivers often face higher compulsory excess)
• The type of claim you’re making
• Your policy terms
• The level of risk you represent

Voluntary excess

Here’s where you get some choice in the matter. A voluntary excess is an additional amount you agree to pay on top of your compulsory excess. Why would you want to pay more? Because choosing a higher voluntary excess typically means a lower premium.

Let’s say your car insurance policy has a £200 compulsory excess. You could add a £300 voluntary excess, giving you a total excess of £500. In return, your insurance company will reduce your monthly or annual premium because you’re taking on more of the financial risk yourself.

How does insurance excess work for different types of insurance?

Different types of insurance have their own excess rules and amounts, so it’s worth understanding how each one works.

Car insurance excess

Car insurance is probably where you’ll encounter excess most often. Your car insurance policy will typically have different excess amounts for different types of claims:

• Accidental damage: Standard compulsory excess plus any voluntary excess
• Windscreen repairs: Often have their own lower excess (sometimes as little as £25)
• Fire and theft: May have the same excess as accidental damage
• Young driver policies: Usually come with higher compulsory excess due to higher risk

If you’re in a crash and it’s your fault, you’ll pay your total excess. But here’s the thing – if the accident isn’t your fault and the other party’s insurer accepts liability, you shouldn’t have to pay excess at all.

Home insurance excess

Home insurance splits into buildings and contents cover, each with their own excess amounts:

• Buildings insurance: Covers structural damage, with excess typically ranging from £100-£1,000
• Contents insurance: Protects your belongings, often with lower excess amounts
• Accidental damage: May have a separate, often higher excess
• Valuables insurance: High-value items like jewellery and electronics might have their own excess rules

Travel insurance

Travel insurance excess varies enormously depending on your policy and the type of claim:

• Medical claims: Often have no excess or very low excess
• Baggage and personal belongings: Typically £25-£100 excess
• Cancellation claims: Can range from £50-£250
• Winter sports: Usually attract additional excess on top of standard amounts

Health insurance

Private health insurance policies often work differently, with excess being an annual amount rather than per-claim:

• Annual excess: You pay this amount each policy year before cover kicks in
• Per-treatment excess: Some policies charge excess for each treatment or condition
• Outpatient vs inpatient: Different excess amounts may apply

Factors that affect your excess amount

Several things influence how much excess you’ll pay:

Age and experience

Young drivers typically face higher compulsory excess because they represent higher risk. Once you’ve got a few years of claim-free driving under your belt, your excess options usually improve.

Location

Live somewhere with higher crime rates or more frequent weather damage? Your excess might be higher to reflect the increased likelihood of insurance claims.

Policy type

Comprehensive cover usually offers lower excess options than basic policies. You’re paying more for the privilege of paying less when things go wrong – makes sense, right?

Claims history

Multiple claims in recent years? Don’t be surprised if insurers want you to have higher excess or limit your voluntary excess options.

How to choose the right excess amount

Getting your excess right is about balancing your insurance premium costs with what you can afford to pay if disaster strikes. Here’s how to work it out:

Consider your emergency fund

Only choose a higher voluntary excess if you can comfortably afford to pay the total excess amount. There’s no point saving £20 a month on premiums if you can’t find £500 when you need to make a claim.

Think about your risk profile

Drive a lot for work? Live in a dodgy area? You might want to keep your excess lower because you’re more likely to need to claim. Conversely, if you’re a careful driver with a garage and good security, a higher excess might make financial sense.

Do the maths

Work out how long it would take for your premium savings to cover the additional voluntary excess. If you add £200 to your voluntary excess and save £50 per year, it’ll take four years to break even – only worthwhile if you don’t claim in that period.

When do you pay your insurance excess?

You’ll typically pay your excess:

• At the time of the claim: Most insurers deduct excess from your payout
• Before repairs begin: Some insurers require excess upfront
• When using approved repairers: The repairer may collect excess directly

The timing varies by insurance company and claim type, so check your policy documents for the specific process.

How to make a claim? 

Making a claim with Lemonade is dead simple – no lengthy phone calls or paperwork. Here’s how it works:

1. Open the app: Report your claim through the Lemonade app in seconds
2. Chat with AI Jim: Our AI claims bot walks you through everything, asking the right questions
3. Upload evidence: Snap photos, take videos, upload receipts, or add any relevant documents straight from your phone
4. Instant assessment: For many claims, you’ll get an instant decision and payout
5. Excess sorted: Your total excess (compulsory plus voluntary) is automatically deducted from any payout
6. Money in your account: Approved claims are often paid within minutes, not days

Example claim scenario

Your car gets damaged in a car park. The total cost of repairs comes to £1,200. Your car insurance policy has:

• £150 compulsory excess
• £250 voluntary excess
• Total excess: £400

You’d receive: £1,200 – £400 = £800 from your insurer, and you’d pay the £400 excess directly to the repairer or insurer.

The beauty of the Lemonade app? You can start and finish your entire claim whilst you’re still standing next to your damaged car. No waiting on hold or endless forms, just quick, honest claims handling.

Is excess protection worth it?

Some insurers offer excess protection or excess waiver insurance as an add-on. This covers your excess if you need to claim, typically costing £20-£50 annually.

When it might be worth it:

• You’ve chosen a high voluntary excess for lower premiums
• You’re a higher-risk driver (young, multiple claims)
• You want complete peace of mind

When to skip it:

• Your excess is relatively low already
• You rarely claim and have good emergency savings
• The annual cost approaches your actual excess amount

Tips for managing your insurance excess

Smart excess management can save you money and prevent nasty surprises when you need to claim.

Keep detailed records

Document everything when you take out your insurance policy. Make sure you understand your excess amounts and keep this information somewhere safe.

Review annually

Your circumstances change, and so should your excess. If you’ve built up savings or your income’s improved, you might want to increase voluntary excess for lower premiums.

Shop around with different excess levels

When getting insurance quotes, try different voluntary excess amounts to see how much you could save. Sometimes the premium reduction doesn’t justify the higher excess.

Consider the full cost

Remember that some policies have different excess amounts for different types of claims. A windscreen claim might have £25 excess, while accidental damage could be £300.

Common excess mistakes to avoid

Avoid these pitfalls that could leave you out of pocket or unable to claim when you need it most.

Setting excess too high

Don’t choose a voluntary excess amount you can’t afford. If you can’t pay your excess, you can’t make a claim – defeating the point of having insurance.

Forgetting about multiple excesses

Some claims involve multiple excess payments. If both your buildings and contents insurance need to pay out after a flood, you’ll pay excess on both policies.

Not reading the small print

Some policies have additional excess for specific circumstances – young drivers, certain postcodes, or high-value items. Make sure you understand all potential excess charges.

Assuming excess never changes

Your compulsory excess might increase with age (in a good way – it usually decreases), or your insurer might change terms at renewal.

The bottom line 

Understanding your insurance excess is crucial for smart insurance decisions. Balance affordable premiums with manageable excess amounts, don’t just chase the cheapest premium if you can’t afford the excess when claiming.

Excess isn’t an extra fee, it’s how you and your insurer share risk. Choose wisely to save money whilst getting the protection you need.

Remember: insurance policies can be complex, and this guide covers general principles. Always check your specific policy documents and speak to your insurance provider if you’re unsure about anything. The Financial Conduct Authority (FCA) regulates insurance in the UK and provides additional consumer protection guidance.

Excess in insurance FAQs