Excessive Excess: What’s the right level of voluntary insurance excess?

what's the right insurance excessMost motorists assume that one of the easiest ways to drive down the cost of their car insurance is to bump-up their claims excess, but a recent report has revealed that opting for a higher excess might not make financial sense.

Calculating insurance premiums is all about calculating risk and if the policyholder can shoulder some of the risk it stands to reason that they should be rewarded with lower premiums. Choosing a higher voluntary excess means you’re much less likely to make a claim and motorists have reasonably assumed they would get cheaper cover.

However, researchers at a leading price comparison website have been comparing levels of voluntary excess with premiums and the figures just don’t add-up. In fact, they found that some motorists were unwittingly agreeing to pay double excess without saving a penny on cover. Even when there were real savings to be made they were often negligible and didn’t reflect the additional risk.

Considering that every year one in ten drivers makes a claim on their car insurance it’s important to choose the right level of excess. If it’s too low you could be penalised with prohibitively high premiums, but if it’s too high you may be put-off making claims. Received wisdom has it that there’s a sweet spot in the middle that carefully balances risk and reward, but the report suggests that most motorists would be better off opting for a lower level of excess.

The headline finding revealed that choosing an excess of £1,000, rather than a more modest £250, would save the average motorist just £12 a year, which is a worrying amount of additional risk to save just £1 a month. The repost went on to reveal that there was absolutely no difference in the average cost of policies with an excess of £500 or £1,000.

If you are concerned that you may have agreed to an unnecessarily high excess, you aren’t alone. It’s estimated that four out of ten have opted for an excess over £250 which means that 16million could be taking significant risks with little or no financial reward.

When it comes to renewing your car insurance don’t fall into the trap of thinking that higher excess automatically means lower premiums. Instead take time to consider the level of excess that you’re happy to pay and then compare quotes accordingly. Better still why not ask your insurance broker to do all the hard work for you?

Quoteline Direct have been helping motorists find competitive cover for nearly 50 years. To find out more, or for a quick online quote, visit our car insurance pages or Tel: 0161 874 8029 to speak with a member of our team.



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