What is Excess on your Comprehensive Motor Insurance Policy?

Jun 2014

What is Excess?

Your excess payment forms a critical component of your Underlying Insurance agreement. It will be a fixed deduction from the loss of agreement amount in the event of a claim. Normally the Insurance payment is made directly to the accident repair “panelbeater” (the term “panelbeater” refers to an establishment where vehicles are serviced and repaired) when the owner collects the car. You will be liable to pay your agreed excess amount directly to the panelbeater in the event of any accidental damage. If your vehicle has been financed, the Insurance Company will pay the financial institution directly in the event of a Total Loss. (Theft, Write off or Hi-Jacked)
If the accident was the other driver’s fault, and this fault is accepted by the third party’s insurer, then the vehicle owner may be able to reclaim the excess payment from the other person’s insurance company. This is process can take some time and is known in the insurance industry as the recovery of excess process.

Different types of excesses that can be charged when you are involved in an accident, or the vehicle is economical non repairable:

Compulsory excess

A compulsory excess is the minimum excess payment the insurer will accept on the insurance policy. Minimum excesses vary according to the personal details, driving record and the insurance company.

Voluntary excesses

To reduce the insurance premium, the insured party may offer to pay a higher excess (deductible) than the compulsory excess demanded by the insurance company. The voluntary excess is the extra amount, over and above the compulsory excess, that is agreed to be paid in the event of a claim on the policy. In return for an increased excess, which reduces the financial risk carried by the insurer, the insurer is able to offer a significantly lower premium.
Excess buy back – You can select to pay a higher monthly premium per month, so that in the event of a claim your excess amount payable will decrease in accordance with your selected buy back option.
Flat rate excess – You can select to pay a slightly higher monthly premium, and have a set excess rate on your insurance.
For example: You will pay a fixed amount of R2000, regardless the value of the claim. This will assist with budgeting more effectively.
Minimum excess or percentage of damage – This is usually the excess structure that most people select, but not aware that the minimum excess amount is based on a certain percentage of the damage or a set amount whichever is the greater of the two.
For example: You will pay 10% of the claim value, or minimum R5000 whichever is the greater, Claim event: Stolen Claim value: R100 000 (10% = R10 000) or Minimum R5000 ,R10 000 being the greater .
Client liable for R10 000 payable to either the repairer/finance company

Aggregated excesses / Additional excesses

These are the type of excesses that are added to your compulsory excess, for additional risk that the insurance company wants you as the client to be responsible for.
Examples:
1. An additional 10% of Claim Value will be deemed as an excess in event of a 2nd claim within in a certain period of time.
2. If you are under a certain age at the time of loss.
3. If your vehicle has been the only vehicle involved in the accident (referred to as single vehicle accident)
4. If the incident has occurred during a specific time of the day (1am-4am)
5. Learner driver
6. In the event of theft

Storage and Towing Fees

Your Underlying Insurance will often contribute towards the costs of Storage and Towing, however limit their responsibility to a certain amount. You will be liable for the balance as per the Storage and Towing invoice. All of the above excesses could have a major impact on your financial liability, which may result in your vehicle being retained by the repairer, or your outstanding balance not being settled.
Become Insurance Smart today, and ensure that you make a well informed decision when selecting your Excesses by requesting your Insurance Company to provide you with your excess structure when concluding your cover.

If you still aren’t sure, get in touch with us today and we will steer you in the right direction.