‘EXCESS’ IN CAR INSURANCE
Car insurance may sound simple till the time you actually get to insure a car. Once you start the process, you will be bombarded with jargons like ABI, IDV, Third party and the like. Excess is such a term that needs to be understood before you go in for insurance. Broadly speaking, ‘excess’ refers to a sum of money that has to be paid by you in respect of the first part of a claim.
The premium for your car is determined by a lot of factors, like value of the vehicle, age of the vehicle, purpose for which it is used, driver’s age driving habits, previous driving history etc. Excess caters for the repair expenditure that will be incurred on account of the damage or compensation related to an accident. The expenditure incurred on account of damage can vary from a trivial amount to astronomical amounts.
At the time of insuring the car, the insurer would have valued your car and made a risk assessment depending on the factors mentioned above. The maximum amount of insurance cover in case of the risk factors would also have been calculated at that point of time. In case the likelihood of the damage being more than the amount covered, you are required to pay an excess. The excess amount can be decided by the company or it may also be voluntary. For example, if you are a driver with a history of leaving a trail of destruction behind you or if you have been visiting the local hospital emergency room too often, then it is advisable to go in for a voluntary higher excess von your insurance. However if you mange to drive without even causing a scratch on your vehicle as well as others, it is not required to go in for a higher voluntary contribution.
Flip through your car insurance papers and you will find a small endorsement of excess and an amount mentioned next to it. Please treat it with more respect and attention next time. The amount decides how much you will have to pay up in case you meet with an accident. Some insurance companies just to lure customers reduce the excess contribution, so as to lower the overall insurance premium. Do not fall prey to this ploy. It will only lead to grief later on as you will be asked to cough up a substantial amount and all that bonhomie when they were trying to woo you over from your previous insurer will nowhere be seen.