Excess Insurance

Being involved in a traffic collision or having your vehicle stolen can be traumatic enough without the added stress and expense of having to make a claim on your insurance.

Not only can a claim have a long term effect on your premiums, but you'll also have to pay out the excess you agreed to when you signed up for the policy. If you're the sort of person who opted for a higher voluntary excess in return for cheaper cover, this can be very expensive.

If the thought of having to part with a few hundred pounds just to make a claim on your insurance worries you, perhaps you'd prefer to protect yourself with excess insurance, which pays the excess for you in the event of a claim.

MoneySupermarket has teamed up with insure4excess to help you find the best rates on excess insurance, but if you're unsure whether it would be suitable for you, here's a little more information on how it works and what it covers to help you decide.

How excess insurance works

When you take out car insurance you'll be asked how much voluntary excess you'd be willing to pay if you have to make a claim. Compulsory excess dictates how much you are expected to pay by default, but the more you are willing to add to that with voluntary excess, the lower your quote is likely to be.

Your total excess isn't hypothetical, nor is it negotiable, so you will have to pay it if you have to make a claim. For younger or less experienced drivers who choose to offset high premiums with high excess, this can be very costly.

Excess insurance works alongside your normal car insurance policy. You pay into excess insurance on the understanding that it will pay out if you have to make a claim, up to a pre-agreed limit.

You choose the upper limit the policy will pay out, so if the total of your compulsory and voluntary excess is £500, you'd take out excess insurance which would cover you up that amount.

As you'd expect, the higher the amount of excess you're looking to cover, the higher your excess insurance premiums are likely to be.

If you do have an accident or your vehicle is stolen and you do have to make a claim, you pay the excess as normal and then claim back your excess from your excess car insurance provider.

Different types of cover

Excess insurance comes into two forms; single and lifestyle. The single policy type, as its name implies, covers the excess on just one insurance policy - your car insurance excess, for example.

Lifestyle excess insurance will typically cover the excess on your car, home, travel, pet and medical insurance policies.

Are there any catches to look out for?

You need to check what the cover will pay out for and what it won't. For example, if the accident which prompts the claim occurs in another country, will the excess car insurance provider pay out?

Do you need excess insurance?

If you'd struggle to find enough money to cover your car insurance excess if it came to making a claim, then excess insurance might be suitable for you.

Bear in mind that you will be paying your excess insurance premiums alongside your car insurance premiums, which could negate any savings you made on your premiums by opting for higher voluntary excess.

On the other hand, research from AXA in February 2012 found that one in three motorists didn't have enough money in the bank to pay the excess they'd agreed to on their car insurance policy.