Claiming from insurance usually involves a level of trauma – either you’ve been in a crash or done something such as driven your vehicle into a wall or scraped it along a pillar in a parking garage.
Thank heavens for insurance, you think – and then you’re hit with the excess bill.
Even if you’re fully covered, you still might have to pay excess. If you didn’t pay excess, your monthly premiums would be even higher.
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HOW DOES EXCESS KEEP MY PREMIUMS DOWN?
If excess didn’t exist, people would claim for every little bump and scratch they got and insurance companies would be forced to hike premiums to cope, says Ernest North of insurance company Naked.
Claims are administratively costly and adding an excess makes policyholders think twice before claiming.
Excess also deters policyholders from submitting fraudulent claims.
HOW DOES EXCESS WORK?
Almost every insurance policy has a basic excess, which is payable each time you claim.
It’s important you understand this or you could be in for a rude awakening when you try to claim, says Lizette Erasmus of IntegriSure.
Here’s an example of how it works: say your excess is R5 000.
You lodge a claim for R50 000 and it’s approved. You’ll pay R5 000 out of your own pocket, and the insurer will pay R45 000.
If the cost of repairing the car is less than R5 000, for instance R3 000, you’ll pay the full amount from your pocket.
If you’re unsure how much your basic excess is, contact your broker or insurer and ask questions until you’re sure you understand– after all, it affects your pocket.
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CAN I ADJUST MY EXCESS?
Rules and options differ from one insurer to the next, but usually policyholders are offered a choice between a voluntary excess or paying an excess waiver, Erasmus explains.
With voluntary excess, you can choose to pay a higher excess amount in the event of the claim in exchange for a lower monthly premium.
Depending on your insurer’s policy regulations, you should be able to specify the amount of your voluntary excess.
It can be anything from R1 000 to about R30 000, Erasmus says.
If you decide to go with the paying an excess waiver option, your monthly premium will be relatively high but there will be no excess payable in the event of a claim.
WHICH IS THE BEST OPTION?
It depends on your financial status and your risk level.
If you frequently use public transport and don’t drive much, you might be better off opting for a lower monthly premium in exchange for a higher excess.
But if you choose this option, you need to make sure you have the financial reserves to cover the excess should you make a claim.
If you fall into the higher-risk bracket – if you commute to and from work during rush hour or frequently drive long distances – it’s a good idea to opt for an excess waiver.
Your monthly premium will be higher, but if you’re in a car crash there will be no excess payable.
Speak to an insurance brokerif you’re unsure which option to go for.
CAN I CLAIM BACK MY EXCESS PAYMENTS?
If you’re found to be the innocent party in a crash your insurer will try to recover its costs from the third party (the guilty party) after the claim has been settled.
If this is successful, your excess will be reimbursed. If the driver of the other vehicle isn’t insured your insurance company won’t reimburse the excess– even if the car crash wasn’t your fault.
