Does raising an excess make insurance cheaper?

raising excessIncreasing voluntary excesses when taking out home or car cover is a well-known way to make insurance cheaper.

But the latest research throws doubt on whether offering to pay more out of your own pocket towards a claim is really sensible.

The doubt comes from a study by supermarket insurer Sainsbury’s Bank.

In a nutshell, their research revealed:

  • 21% of customers claiming against their home or car cover had not thought through the costs they would have to pay when making a claim
  • More than a third (35%) raised their excess so high, they felt making a claim on their insurance was no cheaper than paying out from their own pockets

The survey estimates around 7.5 million car or home cover customers raised their voluntary excesses so they could buy cheaper insurance.

Most insurance policies have a compulsory excess, which is the contribution the customer has to pay against a claim. On top of that, the customer can opt for a voluntary excess. Offering to pay between £100 and £500 extra can significantly reduce the cost of cover – but increases the amount the customer must pay when making a claim.

The bank’s figures show that on average, customers increase their insurance excesses by £327.

A spokesman for the firm said: “Insurance is there to assist you when you need it most. If you’re thinking about selecting a higher excess to reduce your monthly premium, be sure that this won’t cause you any financial difficulty when it comes to making a claim.”

Around 13% of car and home insurance customers with voluntary excesses had an accident or damage to their car or home that they could claim under their policy.

More than a third (38%) made a claim but had to pay the balance of the claim because of the excess, 16% paid by credit card and 16% had to borrow money.

“Anyone considering raising their excess should also consider other ways to reduce their insurance premium, for example, investing extra time in shopping around for the best cover at the most competitive price and looking for discounts and benefits,” said the spokesman.


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