What's voluntary excess (deductible) on car insurance?

When filing a car insurance claim, you'll be responsible for paying a voluntary excess amount to your insurance company as a result. So, what exactly is voluntary excess on car insurance, and how can it impact how much you end up paying on your insurance rates? For all this information and more, stick around!

What is car insurance excess?

Voluntary excess is another word for deductible. A car insurance excess is the amount of money you agree to pay toward the overall costs associated with repairing or replacing your vehicle in the event a claim is filed under your insurance policy before your insurer pays the remaining costs.

For example, if you make a claim with your insurer for vehicle damages and the total expenses come out to $2000, and the voluntary excess you have for your car insurance policy is $300, you'll need to pay that $300 before the remaining $1700 is covered by your provider.

Customers can choose how much voluntary deductible they want to pay when purchasing their car insurance for the first time or renewing their policies.

What is compulsory excess?

When it comes to making an insurance claim, your insurance company may also require that you pay a compulsory excess amount. What is compulsory excess? A compulsory excess is a fixed amount you must pay when you make a claim that is set by your insurer. To determine the car insurance excess you're obligated to pay, your insurance company will consider several factors such as:

• Whether you're an experienced driver or a young or inexperienced driver.
• Your claims history.
• How long you've had your driver's licence.
• And more.

It's important to note that the compulsory excess an insurer sets is often more expensive for those with higher risk profiles than those deemed lower risk.

How does excess work when filing a car insurance claim?

When you make a claim under your car insurance, your compulsory and voluntary excess will be compiled and known as your total excess amount. Most of the time, your total excess must be paid upfront, before remaining repair costs are covered. However, you may be able to pay at the end of your claims process, depending on who your insurance provider is.

For example, if your voluntary excess is $400 and your compulsory excess is a fixed amount of $200, you'll need to pay $600 to your insurance provider in the event of a claim.

How does voluntary excess affect insurance premiums?

When it comes to paying voluntary excess during a claim, you're essentially agreeing to some of the financial responsibility of the total claim amount. Therefore, by opting for higher excess amounts, the lower your premium will be for your car insurance throughout the year.

Is it better to have a higher voluntary excess amount or a lower excess amount?

Should you choose a higher excess or a lower excess amount? In truth, it really comes down to your unique circumstances and needs as a driver. So, let's take a look at the pros and cons of both:

Pros of higher voluntary excess

Here are the benefits of choosing a higher voluntary excess:

• It could make your car insurance cheaper throughout the year, leaving more in your pocket.
• You may be less likely to file low-value claims. Over the years, this could help you qualify for a no-claims bonus on your auto insurance.

Cons of higher voluntary excess

Here’s why a higher voluntary excess may not be advantageous:

• When you make a claim, you'll have to pay higher excess costs on top of the compulsory excess set by your insurer.
• You may not be able to afford to pay the voluntary excess you've chosen, causing you to pay for repairs out of your own pocket, which can also hurt you financially.

Pros of lower excess

Opting for a lower excess can be beneficial for the following reasons:

• The car insurance excess you pay when you make a claim will be lower, which means less money out of your pocket.
• You won't have to worry as much about costs when you need to make a claim with your insurance provider.

Cons of lower excess

Here’s why choosing lower excess might not be in your best interest:

• Your overall cost for insurance coverage will be higher, given that you aren't agreeing to take on that much financial responsibility in the scenario where you need to make a claim.
• Even if you're a careful driver with no previous claims or accidents, you could still end up paying more expensive premiums.
• It may prompt you to file numerous claims per year, which, in turn, would lead to higher claims in the future and show up on your claims experience letter if you switch providers.

Things to consider when choosing your excess amount

When determining how much voluntary excess you want for your car insurance, there are a couple of things you need to consider. Remember, in the event of a claim, you'll need to pay the amount you select when purchasing your car insurance coverage:

Financial circumstances

First things first, you need to make sure that you can pay the excess when you make a claim. So, depending on your financial situation, determine whether you'll be able to pay the full cost of the voluntary excess amount you're considering.

Your insurance costs

The amount you save on your insurance costs will vary depending on other factors considered by your insurance provider. So, you'll need to weigh whether increasing your car insurance excess really is worth the savings you'll experience on your monthly premium.

Your risk level

With all things considered, you'll need to ask yourself how much risk you're willing to take when you make a claim. Can you afford to pay the voluntary excess you've chosen, or are you willing to risk having to pay a higher excess to save money on your insurance premiums?

Driving habits

Lastly, take a look at your driving habits. Consider how often you drive, where you're driving, and what other risks you experience when behind the wheel. This can help you determine how much car insurance excess you should agree to.

In what scenarios would you not have to pay excess?

While you'll need to pay voluntary excess to your insurer, there are scenarios where you won't be obligated to pay. Here's a closer look at a few instances below:

It's the other person's fault

When you're involved in a car accident for which you're at fault, you'll be responsible for paying your voluntary excess amount to your insurer. However, when involved in a collision where the other driver is at fault, you won't be responsible for paying this excess amount.

Third-party liability claims

When it comes to third-party liability car insurance claims, you also won't be required to pay your voluntary excess to your insurer, given that the repairs, replacements, or other associated costs would be paid to the third party involved.

The only time you pay the cost of your voluntary excess is when you're paying for your own losses and damages. For example, when filing a claim under your comprehensive car coverage or collision car coverage.

Your excess has been waived

Lastly, there may be a scenario where your insurance provider comes to the conclusion that the other motorist involved is at fault for damages. Should costs be recovered from the other driver, then there is a chance your insurer will reimburse you for your voluntary and compulsory excesses.

Can I withdraw an insurance claim if I can't pay my insurance excess?

If you aren't able to pay your voluntary excess, you can withdraw your insurance claim. That being said, the further along you are in the claims process, the more difficult it may be for you to back out of claiming your losses.

Additionally, if you refuse to withdraw your claim because you can't afford the cost of your voluntary excess, there is a possibility that your insurance will deny your claim. So, what happens if your insurance denies your claim? You always have the option of coming up with the cost of your excess and paying it to your insurer. Alternatively, there's a possibility that your provider will ask you to cover the remaining costs owed to the body shop that worked on your vehicle once they've deducted the amount owed.

Of course, there are other reasons a claim might be denied that have nothing to do with paying your standard excess. Ultimately, for more clarification on the process, speaking directly with your insurance adjuster is recommended.

Why is there compulsory and voluntary excess on car insurance?

Having to pay excess when filing a claim helps deter the number of false claims being filed to insurance providers. At the same time, it can also help prevent people from filing claims with low expenses, which as a result lowers everyone's insurance claims on average.

What is excess protection insurance?

Excess protection insurance is a standalone policy that can be added to your auto policy as an endorsement. The purpose of this policy is to cover the cost of your voluntary and compulsory excess when you make a claim with your provider.

While you would still need to make a payment to your provider at the beginning of the claims process, you would be able to recover a portion, if not all, of the excess. Note that not all insurance companies offer this type of endorsement. Therefore, you will need to shop around should you wish to add this to your standard insurance policy.

Further, when renting a vehicle from a rental company, you may be offered the chance to purchase car hire excess insurance. Excess insurance for vehicle rentals is designed to protect drivers from financial liability if their rental vehicle is damaged, stolen, or misplaced. When you rent a car from a rental company, you will normally be required to pay a deductible. If the rental vehicle is damaged, this is the amount you must pay out of pocket before it can be repaired or replaced.

Are new drivers subject to a higher compulsory excess?

As a new driver, there is a possibility that your insurer subjects you to a higher compulsory excess than someone with more years of experience behind the wheel. This is because younger drivers are more of a risk to insure than those with more experience. Therefore, to offset this risk, insurers will tack on compulsory excess to your policy to ensure their interests are protected.

Can I make instalments toward my voluntary excess?

Unfortunately, the likelihood of your insurance provider agreeing to an installment plan for your excess is low. The way excess works is that when you purchase your coverage from a company, you agree beforehand to put forth this amount should you need to file a claim in the future. Because you are under contract, you'll need to pay the voluntary and compulsory excesses or deter yourself from submitting a claim in the future.

That said, it depends on your insurance provider. If you have a long-standing relationship with your company, they may be more open to the idea of you paying your excess over time. Remember, you choose your voluntary excess when getting your insurance. So, to ensure you're able to comfortably pay the entire amount in the event a claim needs to be filed, consider your financial situation beforehand, your risk level, and your driving habits, as we mentioned before. It'll help you make a more well-informed decision during the process.

How BrokerLink can help

At BrokerLink, we help Canadians find affordable car insurance. With access to numerous insurance policies from some of Canada's top companies, our brokers can help you shop around, compare quotes, and answer any questions about your coverage. BrokerLink can help you find the following:

• Uninsured motorist coverage
• Accident benefits insurance
• Direct compensation-property damage
• Accident forgiveness insurance

Contact BrokerLink today

Want to lower your car insurance premium? With BrokerLink, you can choose a voluntary excess (deductible) that fits your budget—saving you money on your monthly payments. Talk to us today to find the right coverage and deductible amount for you!

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