Motorists – don’t be fuelled by insurance excess trap

Motorists opting for a higher excess on their car insurance in the hope of securing cheaper premiums may find it is a false economy, warns moneysupermarket.com.

Motorists may assume that with voluntary excess - i.e. the amount a motorist is willing to pay out themselves in the event of an accident - the higher it is then the lower the premium for their cover.  However, research from moneysupermarket.com shows that upping your excess may not always guarantee a great saving. In addition, having a high excess may also make it pointless making a claim.

Britain's number one comparison site analysed the cost of car insurance premiums using a range of voluntary excess levels, from £0 to £500. Overall, motorists can expect to see a difference of only £59, or 15 per cent, in the annual cost of a premium when comparing a £100 excess (£382) to a £500 excess (£323).1 It found that while the cost of a premium will reduce steadily as expected as you increase your excess, the actual differences are minimal - a saving of only £5 between having an excess level of £250 compared to £300. Unsurprisingly, motorists opting for £0 excess will pay the highest annual premium at £495 a year, and when compared to the premium for £100 excess, the research found that motorists offset that cost immediately as the premium is £382 per year; more than £100 cheaper

Steve Sweeney, head of car insurance at moneysupermarket.com, said: "Motorists who are looking to reduce the cost of their car insurance policy may be tempted to bump up the voluntary excess they will pay in the event of a claim in return for cheaper premiums, but our research shows it may not save as much money as you assume. In many cases, paying just a few pounds more will get you a policy with a much lower excess.

"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 and require you to pay.  It is crucial to only set your total car insurance excess at a level you feel comfortable paying in the event of an incident; it could end up backfiring if you increase your excess on the assumption you are saving cash in the short term, only to have to fork out more in the long run if making a claim. For example, if you had a £100 excess and a £500 claim you would pay the first £100 and the insurer the remaining £400. If you set your excess at £400 however, you would have to pay a lot more upfront. It is quick and easy to check the excess level when researching insurance policies so ensure you're aware of the levels before purchase."