What is home insurance excess?

What is home insurance excess?

The excess payment on your home insurance policy is what you contribute towards a claim before your insurer covers the remaining cost. Insurers impose an excess in order to discourage people from making trivial claims on their insurance policies. Most insurance policies have two types of excess: compulsory excess and voluntary excess.

What’s the difference between compulsory and voluntary excess?

When you run a quote for home insurance, you’ll usually see two types of excess payments:

• Compulsory excess: The compulsory excess payment is the amount you’ll have to pay when you make a claim, which is set by your insurer

• Voluntary excess: You’ll also have an option to make a voluntary excess payment on top of the compulsory sum; this should reduce your monthly premiums because you’re telling your insurer that you only intend to claim in serious circumstances

How do excess payments work when I make a claim?

When you make a claim on your insurance policy, you’ll need to pay the excess fee before your insurer will pay out the rest of the claim value - so consider whether it’s worth the cost if you’re about to claim. Here are two examples of when it might and might not be worth it:

Example one

If you’re claiming for £1,000 worth of damage or loss, and your compulsory and voluntary excess add to is £300, you’ll need to pay this £300 before your insurer pays the remaining £700. In this scenario it would be worth claiming as your excess fee is only a small fraction of the total claim amount.

Example two

If, however, the value of a claim you want to make totals around £200, but your voluntary and compulsory excess amounts still total £300, then the cost of making a claim will be £100 more expensive than what you’ll be paid out. In this case, it’ll be cheaper to just pay the £200 and repair the damage yourself - this way, you also preserve your no-claims bonus.bonus, and confiscating the football for a while.

Can a higher voluntary excess bring down my insurance premiums?

Volunteering a higher excess payment to your insurer when making a claim can lead to a reduction in your premiums. This is because providers often see a higher voluntary excess payment as an indicator that you won’t bother making smaller claims, such as example two above, because they won’t be worth the cost. When comparing home insurance policies with MoneySuperMarket, you can adjust your voluntary excess amount and see how it affects the cost of the premiums you’re quoted.

While it may be tempting to increase your voluntary excess for this reason, ensure you can still comfortably afford the overall excess. Otherwise, you’ll find yourself in a difficult situation if something unfortunate happens and you do need to make a claim.

How much voluntary excess should I pay on my home insurance?

To decide how much voluntary excess you should pay on your home insurance, you’ll need to ensure it’s a sum you’ll be able to afford when you need to claim. Factor in what type of insurance you’re taking out and what you need it to cover - if you’ve got valuable items that might cost a lot to cover, it may be worth increasing the excess so you can lower the overall insurance cost.

Are excess payments the same for all types of home insurance claims?

Some home insurance claims are worth much more than others and will usually require a higher excess amount.

Claims for accidental damage are often relatively small, so the compulsory excess is likely to be around £100 – but for flood damage or subsidence the threshold is usually far higher. If you were to make a claim for subsidence, your compulsory excess could be in the range of £1,000 – which, on top of a voluntary payment of £250, would bring the total excess to £1,250.

This is what you would have to pay towards your subsidence claim before your insurer covers the rest – but compared to the actual repair costs you’d face without cover, that won’t seem like much.