Voluntary excess on insurance may be false economy

It may cut your premium but make sure you can afford it if disaster strikes

We're always looking for ways to bring down our insurance costs and for many people that means opting for a high voluntary excess but could this be a false economy?

An excess is the amount you pay towards a claim before the insurer will hand over any money. Most claims have a compulsory excess, partly to dissuade fraudulent claims, but insurers will usually offer you the option of adding a voluntary excess too. The argument for doing so is that in many cases (although crucially, not all) a higher excess means cheaper premiums. So, as long as you don't need to claim, you pay less for your insurance over the year.

For someone with a history of no claims this is an appealing option but only if you can comfortably afford the excess in the event of a claim. Research shows many customers are agreeing to excess levels that are well beyond their means.

A study by Axa Personal Lines has found that more customers are unable to repair damaged vehicles because they can't afford to cover the excess. In 2011, 29 per cent of its motorists didn't have enough savings to pay the excess if required, marking a 61 per cent rise on the year before.

Similarly, InsureMyExcess.com found that a third of recent claimants on motor, household, pet or health insurance struggled to pay the excess, but one in six still increased excess on motor insurance and one in eight on home insurance.

"It's no surprise that consumers are pushing up their excess to save money on their premiums, as pressure mounts on their household income," says Matt Tumbridge, a director of InsureMyExcess.com. "It's a time bomb waiting to explode for many households."

Most comparison websites also automatically default to a voluntary excess level so make sure you check as you could have a voluntary and a compulsory excess which could be a nasty shock when you claim. If the extra excess is so high as to put you off making a claim altogether, it makes paying for the insurance in the first place a complete waste of time.

As well as the risk of being left in the lurch if you do need to claim, it's also important to calculate whether the initial savings are worthwhile.

We asked Moneysupermarket to test out increasing the voluntary excess levels on various policies. After playing around with levels ranging from £0 to £500, the comparison site found that with home contents and buildings insurance you could save an average of £162 when comparing the cost of a £0 excess (£357) with a £100 excess (£195). However, when comparing a £100 excess with £250, the difference was marginal at a mere £20 and even worse, opting for a £300 excess actually pushed the premium back up to £180.

When it came to car insurance, the average saving from no voluntary excess to £100 was considerable at £183, but the discounts on higher excess levels were once again far less impressive. "It's quite clear that there is a saving if you increase your excess but it all depends on your attitude to risk. Unless you're a young driver where your premium is a lot higher, in most cases it makes sense to reduce your excess," says Peter Harrison from Moneysupermarket.

News
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
science
News
Richard Dawkins dedicated his book 'The Greatest Show on Earth' to Josh Timonen
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
Extras
indybest
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Travel
Dinosaurs Unleashed at the Eden Project
travel
Arts and Entertainment
music
Sport
football
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

    £45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

    Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

    Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

    AIFMD Business Analyst / Consultant - Investment Management

    £450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

    Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

    £450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

    Day In a Page

    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
    eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

    eBay's enduring appeal

    The online auction site is still the UK's most popular e-commerce site
    Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

    'Lack of ethnic minority and black faces on TV is weird'

    Culture Minister Ed Vaizey calls for immediate action to address the problem
    Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

    Magic circles: Artist Olafur Eliasson

    Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
    Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

    Josephine Dickinson: 'How I discovered a new world of sound'

    After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
    Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

    Greggs gives lesson in crisis management

    After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
    Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

    Matthew McConaughey sings the praises of bumbags

    Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
    7 best quadcopters and drones

    Flying fun: 7 best quadcopters and drones

    From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
    Andy Murray: I quit while I’m ahead too often

    Andy Murray: I quit while I’m ahead too often

    British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home