Will My Insurance Be Cheaper If I Increase My Voluntary Excess?

How Does Increasing Your Voluntary Excess Affect Your Premium?

One of the most common ways to lower the cost of car insurance is by increasing your voluntary excess. By agreeing to pay a higher amount towards any potential claims, you reduce the risk for your insurer, as they know you’ll be covering a larger portion of the costs in the event of an accident or damage.

Here’s how increasing your voluntary excess can impact your premium:

• Lower premiums: Generally, the higher your voluntary excess, the lower your monthly or annual premium. This is because the insurer faces less financial risk, so they reward you with a reduced premium.
• Increased out-of-pocket expenses: Whilst your premium may be lower, you’ll have to pay more if you ever need to make a claim. This could lead to higher immediate costs if your car is damaged or stolen.
• Balancing risk and savings: It’s regularly a wise decision to strike a balance between reducing your premium and ensuring that the voluntary excess is an amount you can comfortably afford to pay if the worst happens.

Whilst a higher voluntary excess can reduce your premium, it’s important to carefully consider whether the savings are worth the potential financial strain of paying a larger excess in the future.

Is Increasing Voluntary Excess A Good Option For You?

Deciding whether to increase your voluntary excess depends on your personal circumstances and risk tolerance. If you’re confident in your driving abilities, rarely make claims, and want to lower your premium, increasing your voluntary excess might be a good way to reduce your monthly payments.

However, it’s important to think about the following factors:

• How likely are you to make a claim? If you drive frequently in busy areas, or your car is more prone to theft or damage, you may want to keep your voluntary excess at a manageable level in case you need to claim.
• Your financial situation: Increasing your excess is only beneficial if you can comfortably afford to pay it in the event of a claim. Consider how an unexpected cost would affect your finances.
• Your vehicle’s value: If your car is older or of lower value, it might not make sense to pay a high voluntary excess, as the excess could end up being a large portion of your car’s overall value.

It’s frequently supported to weigh up the potential savings on your premium against the risk of having to pay a larger amount in the future.

What’s The Difference Between Compulsory And Voluntary Excess?

Understanding the difference between compulsory and voluntary excess can help you make an informed decision about how much excess to select. Here’s a breakdown of the two types:

• Compulsory excess: This is the amount set by your insurer and is non-negotiable. The compulsory excess is based on factors such as your driving history, age, and the type of car you drive. It’s the minimum amount you’ll need to pay if you make a claim, and this figure varies between insurers.
• Voluntary excess: This is the additional amount you choose to pay on top of the compulsory excess. You have full control over the voluntary excess, and selecting a higher figure can help lower your overall premium.

Both types of excess are combined to form the total amount you’ll pay when making a claim. For example, if your compulsory excess is £200 and your voluntary excess is £300, you’ll need to pay £500 in total if you make a claim.

Will Your No-Claims Discount Be Affected?

One of the biggest benefits of maintaining a clean driving record is the no-claims discount (NCD) you build up over time. This discount can significantly reduce your insurance premium, often by as much as 60-70% after several years without a claim. But how does increasing your voluntary excess affect your no-claims bonus?

Here’s what to consider:

• Making a claim: If you increase your voluntary excess and make a claim, your no-claims discount may still be affected unless you have protection in place. The excess amount you pay doesn’t prevent the loss of your NCD; it simply reduces the insurer’s liability.
• No-claims discount protection: If you have opted for no-claims discount protection, you can usually make one or two claims without losing your discount. However, your premium may still increase slightly, depending on the circumstances of the claim.
• Balancing risk: Opting for a higher voluntary excess may make sense if you rarely claim, but bear in mind that even one claim can reduce the benefits of your NCD in future renewals.

The no-claims discount is a valuable tool in keeping premiums low, so it’s worth factoring in its potential impact when deciding on your voluntary excess.

What Are The Risks Of A High Voluntary Excess?

Whilst increasing your voluntary excess can reduce your premium, there are risks involved, particularly if you ever need to make a claim. Here are some of the main risks to consider before opting for a higher excess:

• Higher out-of-pocket costs: The most obvious risk is that you’ll have to pay more in the event of a claim. If you set your voluntary excess too high, it could strain your finances at a time when you’re already dealing with the aftermath of an accident or damage to your car.
• Low-value claims: If the cost of repairing your car is close to the total excess amount, it may not be worth claiming at all. In some cases, the excess you’ll need to pay could be higher than the cost of repairs, meaning you’d be out of pocket without the benefit of a claim.
• Limited flexibility: Once you’ve chosen a higher voluntary excess, you’re committed to paying it in the event of a claim. If your circumstances change and you’re no longer able to afford the excess, you may look for yourself in a difficult situation.

To mitigate these risks, it’s regularly seen as beneficial to choose a voluntary excess that aligns with your financial situation and driving habits. Consider how much you can reasonably afford in the event of a claim and how likely you are to need to use your insurance.

What Should You Consider When Setting Your Voluntary Excess?

Choosing the right voluntary excess requires balancing the immediate benefit of lower premiums against the potential cost of making a claim. To make an informed decision, consider the following:

• Your driving history: If you have a good driving record and rarely make claims, you may feel comfortable increasing your voluntary excess to lower your premium. However, if you’re more prone to accidents or live in an area with higher risks of theft or damage, you might want to keep your excess lower.
• Your financial stability: Only set a voluntary excess that you can realistically afford to pay. If an accident or damage occurs, you’ll need to pay this amount before your insurer covers the rest. Choosing an excess that’s too high could leave you struggling to pay for repairs.
• The value of your car: Consider the value of your car when choosing your excess. If your car isn’t worth much, a high voluntary excess may not be worth the risk, as the excess could take up a large portion of the car’s value in the event of a claim.

Taking these factors into account might help you choose an excess that offers the best balance between premium savings and out-of-pocket costs.

Is It Worth Increasing Your Voluntary Excess?

Whether increasing your voluntary excess is the right choice depends on your individual circumstances. For some drivers, the reduction in premiums can provide valuable savings, especially if they rarely make claims. However, for others, the potential financial burden of paying a higher excess in the event of a claim may outweigh the benefit of a lower premium.

Ultimately, the decision comes down to how much risk you’re willing to take on. If you’re confident in your ability to drive safely and avoid claims, increasing your voluntary excess can be an effective way to reduce your insurance costs. On the other hand, if you’re concerned about covering a larger portion of repairs after an accident, it might be better to keep your excess at a more affordable level.

Ready to explore your options and look for the best deal on car insurance? Compare quotes today and see how adjusting your voluntary excess can help lower your premium.

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