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FAQ - Insurance Excess

Insurance excess is a term used in the Insurance industry referring to the first amount payable, which you are then liable for in the event of you making a claim. Your excess amount is dependent on your insurer and what you either asked for or agreed upon when you accepted and signed the insurance policy. The excess amount may have an effect on your overall monthly premium, with the general rule of thumb being the higher your excess, the lower your monthly premium, dependent of course on you as a risk to the insurer.

In South Africa, there are generally 3 types of excesses, namely:

  • Standard Excess This is the basic excess amount listed in the specific section of your policy to which you want to submit a claim against
  • Additional Excess This may apply in certain circumstances and would be in addition to the basic excess amount specified. An example of an additional excess amount may be if a driver is under the age of 25 years old and your policy stipulates that an additional excess amount would be payable to all drivers under the specified age.
  • Voluntary Excess As already mentioned, most insurers would allow policy holders to increase their excess amounts in order to achieve a lower monthly premium. This would obviously be in addition to either the standard or additional excess amounts specified.

Most local insurers have a fixed excess amount which means that in the event of you making a claim, that amount would be the amount you would have to pay whether the claim be R5000.00 or R20 000.00. An example of this would be if you had a motor vehicle accident and the repairs came to R20000.00, and your excess was R2000-00, you would need to pay the panel beater the R2000-00 on collection of your vehicle with your insurer then paying the balance directly to the panel beater.

It is also important to be aware that the excess covers the first portion of a claim and not a pro rate sum. This means that if your excess is R2000.00 and the value of the claim is R2000-00, then you would be liable for the full amount with your insurer not having to contribute at all. This is an important point which you should be aware of before making any form of a claim. You should also think twice about submitting a claim for an amount which is just slightly more than your excess amount as claims will have an effect on no-claim bonuses which are being offered by most insurance companies nowadays. Another downside is that your risk and an insured party may increase meaning that your premiums will generally go up once a claim has been made. This will also make it difficult should you wish to get competitive insurance quotes from competing insurers as you may be regarded as a higher risk.

You should also be aware that there may be differing excess amounts which are dependent on the types of policies that you have. It is always best to check with your insurance company, but an example may be the excess payable in the event of an accident compared to the excess payable in the event your vehicle was stolen.

Nowadays, it is also possible to take out an insurance policy that will cover either a percentage of your excess or maybe even the whole amount. This would obviously have an effect on your premiums but may be a good idea if you are either on a tight budget and would not be able to pay the excess in the vent of a claim, or if you have a very high excess on your main policy.

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