Excess

An excess will generally always need to be paid to make an insurance claim. Read this guide to understand how an excess works.

What is an excess?

An excess is a fixed amount you pay when making an insurance claim. 

It is your contribution to the claim and helps keep the cost of premiums down for you and all customers by preventing low value claims being made. 

Why is it an issue for consumers?

The IFSO Scheme receives many enquiries from people who are unsure if they need to pay an excess. An excess will generally always need to be paid to make a claim. To avoid any surprises at claim time, it is important you understand when you need to pay an excess and the amount/s to be paid. 

There are different types of excesses. It can be an unexpected cost if you do not know what excesses may apply to a claim. 

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Real life examples

Viv’s* dog damage

Viv’s carpet was damaged when her dog was sick. The damage occurred at different times of the day, in different rooms. Viv needed to pay 3 separate excesses, because each location of damage was a separate event.   

Mia’s* car theft

Mia’s car was stolen. The offender was charged and Mia felt that she should not be required to pay an excess, because the theft was not her fault. While Mia was not at fault, she still needed to pay an excess to make the claim.  

Lee’s* landslip claim

Lee’s rental property was damaged after a bad weather event. Lee felt the standard excess of $500 should apply, because rain was the cause of the damage. However, the insurer said the $10,000 landslip extension excess applied. The IFSO Scheme closely analysed the policy wording and found that Lee needed to pay the higher $10,000 excess for the landslip extension cover. 

*Names have been changed

Things to know about an excess

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  1. Types of excess

    There are four main types of excesses:

    Standard

    The minimum excess set by the insurer. Different policies will have different standard excesses. 

    Example: A contents policy may have a standard excess of $300. This is the minimum excess that all insured customers will pay to make a claim. 

    Voluntary 

    You choose a higher excess than the standard excess, in return for a discount on the premiums paid. 

    Example: Eric chooses to pay a voluntary excess of $1,000 for his contents because he only wants to claim on his policy for significant damage or loss. 

    Imposed

    Your insurer chooses to impose a higher than standard excess. This is because of an increased risk. 

    Example: John has made a high number of contents claims in the previous three years. His insurer imposes an excess of $1,000 for contents claims. 

    Graduated

    This is a feature of car insurance where the excess will increase in certain circumstances – usually due to the age of the driver and/or their type of licence. 

    Example: Carly’s daughter had an accident in Carly’s car. A higher than standard excess applied because Carly is under 25 years old. 

    An excess will almost always need to be paid when you make a claim. There are some limited circumstances when an insurer may not require an excess. These exceptions will be set out in your policy document. For example, some car insurance policies may waive the excess for glass claims. 

  2. Choosing the amount of an excess

    You can request a higher voluntary excess than the standard excess. Your insurer will confirm the voluntary excess amounts available for your policy. 

    Choosing a higher excess will lower your premiums. However, you won’t be able to make a claim for any damage or loss below the excess amount. You will need to cover the damage or loss below the excess amount yourself.   

  3. How the excess is paid

    When you make a claim, your insurer will confirm how the excess will be paid. You may be asked to pay the excess to the repairer. If the insurer is paying you a settlement amount to your bank account, it will usually deduct the excess from the amount it pays to you. 

  4. You may need to pay more than one excess

    There are 2 key situations when you will need to pay more than one excess:

    1. Damage or loss that occurs under more than one policy. For example, if a fire damages both your house and furniture and you make claims under both your house and contents policies, you will pay one excess for the house claim and a second excess for the contents claim. 
    2. Damage or loss that is caused by more than one event under the same policy. For example, if a tenant smashes a hole in the rental property wall with a hammer and later knocks over the letterbox with their car, these are 2 separate events and you will need to pay 2 excesses. 
  5. Is an excess payable if I am not at fault?

    In most cases, you have to pay the excess when you make a claim, even if you are not at fault. Your insurance policy will set out when you need to pay the excess. Sometimes, vehicle policies have a “no fault” provision and, if you meet all the requirements, the insurer may waive the excess. If you are unsure, ask your insurer. 

  6. My vehicle has been damaged and the person at fault won’t pay their insurer’s excess. What do I do?

    If the person at fault has not made a claim on their insurance policy, you can make a claim on your own vehicle policy and pay your excess. Your insurer will assess your claim and, if accepted, it will arrange the repairs to your car. While the insurer may attempt to recover your excess from the person at fault, it is not required to do so. 

Tips to avoid problems

Read your policy

Check your insurance policy and schedule for details of the excesses that apply. 

Make changes if needed

Talk to your insurer if you would like to request changes to your excess, or if you have any questions. 

Check your policy details each year at renewal

At each policy renewal, review your excesses to make sure they are still appropriate for your circumstances. Talk to your insurer if you are unsure.