Why understanding car insurance excesses is a game-changer

Making an informed choice could save you thousands

Using car insurance as an example, an excess is a standard amount that you need to pay when your insurer settles your claim. It serves to motivate clients to drive responsibly and to refrain from submitting small, petty claims. Depending on your choice of insurer, your insurance excess could either be a fixed amount or a percentage of the final claim amount. In some instances, you may need to pay an additional excess on top of your basic excess amount. Here’s what you need to know: 

What is a claim excess in insurance? 

In simple terms, a car insurance claim excess refers to the out-of-pocket payment you will need to pay when your car insurance claim is settled. You will usually pay the specified amount directly to the service provider before they will start with the repairs to the vehicle. Your insurer will settle the outstanding amount directly with the service provider. 

Let’s assume you’re in a car accident and the damage to your vehicle amounts to R30 000 and your basic vehicle excess is R4 000. Your insurer will appoint a panel beater to fix the damage to your vehicle. When you take your vehicle to the panel beater to get fixed, you will pay R4 000 directly to the panel beater whereafter your car will be booked in. Your insurer will pay the remainder of the cost (R26 000) to the service provider. 

Fixed excesses vs. percentage-based excesses

A fixed excess amount means that you will always know exactly what your out-of-pocket payment will be in the event of a claim. One of South Africa’s leading short-term insurers, OUTsurance, offers fixed excesses from the get-go. They believe that this is to the benefit of the client in that there will be no surprise comes claim stage: you will always pay the fixed amount, regardless of the value or type of claim. 

A percentage-based excess, on the other hand, relates to a set percentage (usually around 5-10%) of the claim amount. If, for example, your repair cost is R300 000, following a vehicle accident and your percentage-based excess is 10%, you will be liable for a cash payment of R30 000. 

Pitfalls of low vs. high excess amounts at sales stage

Insurers often attract customers during the sales process by offering policies with high excess amounts. This strategy lowers the monthly premium, making the deal appear very appealing upfront.

However, the downside becomes clear at claims stage: before any repairs can begin, the high excess must be paid in cash to the panel beater. For many, this unexpected cost can be a major shocksometimes leaving them unable to afford the repairs when an incident occurs.

On the other hand, choosing a low excess amount at the sales stage typically means paying a slightly higher monthly premium. But when something goes wrong, the excess is minimal, and the insurer handles the claim without placing a heavy financial burden on you.

The difference between a basic and an additional excess 

• A basic excess: Looking at insurance excesses at its most basic level, most insurers offer a basic excess amount as part of their car insurance product offering. As explained previously, the basic excess can be either fixed or percentage based.  It’s crucial to ask your insurer whether there are any additional vehicle excesses that may apply under specific circumstances; and also, whether the excess amount is fixed or based on a percentage of the claim amount. The basic car insurance excess across insurance companies averages around R5 000, but again – that’s based on a fixed excess amount and also depends on whether an additional excess amount will come into play.  
• A voluntary excess: You’ll notice that the excess amount directly affects your monthly premium, with some insurers giving you the option to select a voluntary excess amount which is either lower or higher than the default amount. A higher excess will result in a lower monthly premium, but – keep in mind that if you claim, you may end up with an expensive bill you need to foot before your claim can be settled. On the other hand, a low excess amount will result in a higher monthly premium. This being said, some things are best left to the experts and it’s advisable that you use this method ‘budgeting’ with extreme caution.
• Additional excesses: In short, an additional excess is an additional amount that is payable on top of your basic excess under specific circumstances. Please do ask your insurer if and when additional excesses will apply to your car insurance policy. Using OUTsurance as an example, you will only be charged an additional excess if the incident driver is not the regular driver of the insured vehicle and under the age of 25. If you’re NOT insured with OUTsurance, however, one or more of the following additional excesses may come into play which could result in a total excess far beyond your financial means. 
  • Single vehicle accidents (including driving into an unoccupied vehicle)
  • If the incident took place between 22:00 and 6:00
  • If the incident driver has had a driver’s licence for less than 2 years. 
  • If the incident occurred outside of SA and the car is not drivable
  • If the incident occurred in the first 3 months of cover
  • If the policyholder has not had 12 months uninterrupted car insurance immediately prior the start date of his or her cover
  • If the incident driver is not the regular driver of the vehicle

Are you getting the most of out your insurance?

Get an OUTsurance car insurance quote and get the best of both worlds: affordable cover with a fixed excess in the event of a claim. And if you don’t claim? Well, then you could qualify for a cash OUTbonus where 10% of your paid premiums are paid back to you after three consecutive years of cover. 

OUTsurance is a licensed insurer and FSP. The OUTbonus is a standard product feature, only paid after three claim-free years and is premium dependent. Ts and Cs online. 

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