Don't exceed sensible car insurance excess levels

Selecting a higher voluntary excess on your car insurance may cost motorists more in the long term, warns MoneySupermarket.

Motorists opting for a higher voluntary excess level to reduce the overall cost of their car insurance premium, could fork out more in the long run, according to MoneySupermarket.com, and in some cases the impact on premium prices is minimal.

Research from the comparison site analysed the cost of car insurance using a range of voluntary excess levels, from £0 to £500, to evaluate the effect on premium prices.

The research showed a difference of around £190 to the annual cost of a premium when comparing the average cost of a £0 excess (£653 overall premium price) to a £500 excess (£463 premium). However, opting for a lower cost upfront and setting an excess level of around £500 could be a costly false economy should you need to make a claim. The difference in premiums is only £25 when comparing a £200 excess (£496 total premium cost) to a £400 excess (£472 premium cost).

Peter Harrison, car insurance expert at MoneySupermarket, said: "Motorists looking to cut costs may assume altering the voluntary excess level to a higher amount will result in a lower premium price. But motorists beware: this isn't always a cost effective option.

"The amount of voluntary excess on a policy is the money you are willing to pay should you need to make a claim, in addition to any compulsory excess the insurer will add - the combined excesses could be several hundred pounds.  It's crucial to set the total excess at a level you can afford to pay, and one which makes making a claim worthwhile. For example, if you had a £100 total excess and claim for £500, you would pay the first £100 and the insurer the remaining £400. With a £500 total excess, you would pay the entire amount, making a claim pointless. It's quick and easy to check the excess level when researching insurance policies so ensure you're aware of the total excess level before you purchase.

"Our research also shows that increasing the excess levels on motor insurance, in some cases, can have a minimal impact on prices. For example, the difference between the average car insurance price for a policy with a £200 excess and one with a £400 excess was just £25; so someone looking for car insurance needs to consider whether the short term savings are worth potential higher costs in the future, should you make a claim."