Insurance excess: compulsory and voluntary excess explained

An insurance excess is the amount you agree to pay towards a claim before the insurer pays anything. The Financial Ombudsman Service describes it as "an amount you have to pay towards making a claim", agreed when you take out the policy and set out clearly in the policy documents¹. Scope, the disability charity, puts the same idea more bluntly: the excess is "the maximum amount of money you will have to pay if you make a claim"².

Almost every type of insurance uses one. Home, car, travel, pet, health and gadget policies all typically include an excess, and the amount varies by policy and by the type of claim. On a home policy, for example, nidirect, the Northern Ireland government information service, explains that the excess "is the amount you must pay before the company pays a claim for damage"³. Halifax describes its home insurance excess in the same terms: "An excess is the amount you'll pay towards any successful claim you make"⁴.

The excess is not a penalty and it is not a fee. It is the first slice of the loss, and you carry it either by paying it directly or by having it deducted from the payout. This page explains the two parts that make up most excesses, how the money moves on a real claim, how pet insurance treats the excess differently, and when you do not have to pay one at all.

What an insurance excess is

The excess exists because insurers do not pay the whole of every loss. The Post Office's guide defines it as "a pre-agreed amount of money you need to pay if you make a claim"⁵. That amount is fixed when you buy the policy and shown in the policy documents, so there should be no surprise about the figure itself, though many people do not check it until a claim is already underway.

The purpose is partly to keep premiums down and partly to stop insurers being used for trivial losses. If every scratched bumper and lost phone charger triggered a full payout, premiums would have to cover the administration of millions of tiny claims. The excess shifts the first part of each loss back to the person insured.

How you actually pay it depends on the claim. With a car repair, the excess is commonly paid to the repairer as the first part of the bill: the Post Office gives the example that "if your car repair costs £500 and your excess is £100, you'll pay £100. Your insurer will pay the remaining £400"⁵. With a home claim, the excess is more often deducted from the settlement. Halifax gives the example: "if you have an excess of £300, and make a claim for £1,000, you only pay £300 and we pay £700"⁴. With private health insurance, the insurer "will usually contact you to settle" the excess⁹.

The excess is not the same thing as a cover limit, which caps what the insurer pays out in total, and it is not an exclusion. It is simply the point at which the insurer's contribution begins. A policy can have both a limit and an excess, and both reduce what lands in your bank account on a claim.

Compulsory and voluntary excess: how the two add up

Most policies split the excess into two parts. The compulsory excess is set by the insurer and you cannot remove it. The voluntary excess is "an optional amount you choose to pay on top of your compulsory excess"⁵. When you buy cover, the quote form usually asks you to pick a voluntary excess from a range, and that choice is added to the compulsory amount to give the total you would pay on a claim.

The compulsory part is often linked to risk. A young driver's car policy, for example, may carry a compulsory excess that reflects the higher likelihood of a claim, and the Post Office gives £250 as an example of a compulsory excess for drivers under 25⁵. BIBA, the British Insurance Brokers' Association, warns buyers to "beware that compulsory excesses may already apply" before choosing a voluntary amount on top¹⁰. Home policies work the same way: the Post Office notes that "compulsory and voluntary excess work in a very similar way to car and van insurance", and that excess amounts can vary by the type of claim, for example water damage versus burglary⁵.

Insurers structure the choice differently. RBS explains that on its home insurance "some excesses are voluntary and others are compulsory and other Policy Excesses may allow a choice from a range of options"¹¹. Halifax says the excess on its policies "will vary, depending on the level of cover you've selected and the excess amounts you've chosen"⁴. Some policies also carry special excesses for particular risks: both Tesco's standard home insurance and Nationwide's Enhanced home insurance carry a £1,000 subsidence excess¹², a much larger figure than the standard excess on the same policies.

The key point is that the two amounts do not replace each other. Choosing a voluntary excess of £100 does not mean your total excess is £100 if a £250 compulsory excess already applies. The total is the sum of both, and that total is what leaves your pocket on claim day.

Worked example: £350 total excess on a £1,000 claim

The clearest way to see how an excess works is to follow one claim from start to finish. The Post Office's example: "if your compulsory excess is £250 and you choose a voluntary excess of £100, your total excess is £350. If you make a claim for £1,000", you pay the first £350 and the insurer pays the remaining £650⁵.

Notice what the example shows about the mechanics. The insurer does not pay £1,000 and then invoice you for £350. The excess comes off the claim, so the money that moves to you is the £650 balance. If the excess is paid to a repairer instead, the same arithmetic applies in a different order: the repairer collects £350 from you and £650 from the insurer.

The same split works at any size of claim. On a £500 repair with the same £350 total excess, you would pay £350 and the insurer £150. On a £5,000 claim, you would still pay £350, because the excess is a fixed amount, not a percentage, on most policies. The exception is pet insurance, where a percentage co-payment can apply, and that is covered later on this page.

A higher voluntary excess lowers the premium but raises what you pay

Choosing a higher voluntary excess is, in effect, a bet that you will not claim. Which? explains the trade-off in its guide to black box car insurance: "The higher this is, the lower your premium will be. Remember, though, that policies almost always have compulsory excess" underneath¹⁴. The Post Office puts the same point as a warning: "Opting for a higher voluntary excess can lower your premium, but it also means paying more if you need to claim"⁵. BIBA's home insurance guidance agrees that "if you agree to pay a higher excess in the event of a claim your premium will be lower"¹⁵, and RBS tells its home insurance customers "you may get a cheaper policy by agreeing to pay a higher voluntary excess"¹¹.

The size of the saving varies. BIBA's motor guide gives £100 as an example of an additional voluntary excess that can attract a discount¹⁰, but the discount for each step up is set by each insurer and is not guaranteed to be worth the extra exposure. The same logic runs through travel insurance, where "usually, the higher the excess you have to pay, the cheaper the travel insurance"⁷, and through private medical insurance, where a higher excess also lowers the premium¹⁶.

The practical test is affordability. Which? describes self-insurance as "increasing your excess to the highest amount you would comfortably be able to pay yourself if you needed to make a claim"¹⁷. That framing matters: a premium saving that leaves you unable to fund the excess when a pipe bursts has not saved you money. BIBA's storm guidance tells home policyholders to "check that you have a competitive excess and that you can afford to pay it in the event of a claim"¹⁸, and its winter sports guidance repeats the same check for skiing cover¹⁹.

There is a second consequence people often miss. A claim where you pay a large excess still counts as a claim. It can affect your no-claims discount and your future premiums, as the no claims discount page explains, and the excess is paid on top of that. Stand-alone excess protection policies exist that pay back the excess after a successful claim, and are covered on their own page.

Claims smaller than the excess are not paid

If a loss is smaller than the excess, there is nothing for the insurer to pay. The Waggel pet insurance example states this plainly: "Any claim made under £100 will not be paid by us"⁸. The same principle applies across insurance: the insurer's contribution is the claim value minus the excess, and when that sum is zero or negative, the claim produces no payout.

This is where the size of the excess matters most. Which? found that many pet policies carry "an excess of around £120", and noted that on a typical claim most owners "still received more than £250 back after the excess was deducted"²⁰. But a vet bill of £100, or a lost item worth £60, would fall entirely inside the excess on such a policy.

The same arithmetic shapes decisions on other covers. Adding a mobile phone to contents insurance "could result in you having to pay a higher excess if you claim"²¹, which can make a small phone claim pointless. On private medical insurance, Which? notes there is "usually an excess to pay, and it could still be hundreds of pounds, depending on the level of cover you've chosen"²². A policy with a £1,000 subsidence excess¹² will not respond to minor cracking that costs a few hundred pounds to put right.

Whether it is worth claiming at all is a judgement, not a rule. Which?'s car accident advice sets out the considerations, including the effect on your premium, before you decide²³. A claim for slightly more than the excess pays you only the difference, and the record of the claim can outlast the money. The rejected claims page explains what to do if an insurer refuses a claim you believe is valid.

How excess works in pet insurance: per condition, per policy year

Pet insurance treats the excess differently from most other covers, and the differences are worth understanding before you buy. The Post Office explains that pet excess "can work in two ways: a fixed amount per claim or a percentage of the vet bill. This is known as a 'co-payment', which usually applies to older pets"⁵. If you have a co-payment policy, "you'll have to pay this along with the excess", not instead of it²⁴.

The second difference is how often the excess is charged. On many policies it is charged per condition rather than per visit. Waggel's worked example shows the mechanics: a policyholder with a £100 excess and £4,000 of vet fee cover claims £1,000 for a new condition, pays the £100 excess, and the insurer pays £900, leaving £3,000 of cover for the rest of the policy period. "Mrs. Smith will not have to pay this Excess again during the current policy period" for return visits about the same condition, but "will have to pay a £100 Excess for any new unrelated condition"⁸.

How the excess is charged depends on the type of policy. The Post Office states that on its Time Limited and Max Benefit policies the excess "is payable per condition", while on its Lifetime policies it "is payable per condition, per year"²⁶. That distinction follows the structure of the cover itself: per-condition (max benefit) policies pay a limited amount for each condition and stop once the limit is reached²⁷, while lifetime cover has a maximum limit for each condition that resets each year⁹. On lifetime cover, a long-running condition such as arthritis can therefore mean paying the excess once a year, every year, for the same illness.

Older pets face a further change. The Post Office tells its pet insurance customers that "when your pet reaches the upper ages of their policy, their excess will change to a percentage of the claim or the set excess, whichever is more"²⁶. Which? also notes that "as pets age, insurance premiums typically rise"²⁴. The pet insurance excess and co-payment page covers these rules in more detail, and lifetime or time-limited pet cover explains the policy types.

When you do not pay an excess

There are circumstances in which no excess is due, and they are worth knowing before you assume the worst.

• Third-party claims on third-party-only car cover. If you have third-party only car insurance, "you won't need to pay an excess for other people's claims", because the policy covers damage to other vehicles but not your own; you would be responsible for the cost of any repairs to your own vehicle⁵.
• Credit hire and credit repair after a no-fault accident. The Financial Ombudsman Service explains that with these arrangements "there is no payment or excess to pay upfront"²⁸.
• Policies with no excess. Most policies carry one, but "some travel policies might give the option to have no excess"¹, sometimes for an extra fee.
• Excesses that do not apply to a particular claim type. Some sections of a policy may be exempt, and the policy schedule lists which excesses apply to which perils.

The not-at-fault question deserves its own answer, because it catches many people out. The Post Office states that "in most cases you still have to pay the excess even if the accident wasn't your fault. You usually pay it upfront", but you might get it back if the other driver is found to be at fault and their insurer agrees to pay⁵. BIBA's accident checklist makes the same point about repair contributions: "If you have to pay a proportion of the repair costs, then you must pay this to the repairer irrespective of who was to blame"²⁷. Which? sets out the recovery route: "you can pay the excess then pursue the insurer of the other driver to reimburse it once the claim is settled", or take the other driver or their insurer to the small claims court²³.

Travel insurance has its own wrinkles. The excess "typically applies to claims for medical expenses, lost baggage or cancellations", and if you are claiming for more than one person it may apply per person rather than per claim⁵. BIBA notes that "some insurers apply an excess per item (e.g. passport, wallet, luggage)"²⁹. An ombudsman case study found a policy where an excess was payable "per insured person, for each and every incident, under each and every section of cover", which multiplied the amount the customers lost from a baggage claim³⁰. Checking how the excess is applied, not just its size, matters most on multi-person and multi-item claims.

Changing your voluntary excess

Your voluntary excess is a choice, and choices can sometimes be revisited. The Post Office states that "some insurers let you change your voluntary excess mid-policy, but it may affect your premium"⁵. If you raise it, the insurer may refund part of the premium; if you lower it, you may owe the difference. Any change is a change to the policy terms, so it is worth confirming in writing what the new total excess will be, compulsory and voluntary combined, before agreeing.

Renewal is the natural point to review the choice. Independent Age, the older people's charity, describes an excess as "the amount you agree to pay when you make a claim, before the insurance provider pays anything", and warns that increasing it "may make the policy cheaper but can leave you out of pocket"³¹. The renewals page explains how the renewal process works and what to check.

Insurers can change excesses too, and not only at renewal. A Financial Ombudsman Service case study about a complaint over premium increases records that the insurer explained the changes were "based on it making changes to the level of excess as well as other changes to the level of cover"³². So the excess you signed up for is not guaranteed to be the excess you have at the next renewal, and the renewal documents should be read rather than filed.

If a claim has already gone wrong, and an insurer has charged an excess you do not believe applied, you can complain to the insurer and then to the Financial Ombudsman Service. In one home emergency case the ombudsman looked at, "Alisha's insurer wouldn't refund the £50 excess it had charged her" for an unfinished repair, and the complaint was about exactly that kind of charge³³. The complaints page explains the process and the time limits.

Finally, if the reason you are considering a higher excess is that the premium has become hard to afford, it is worth knowing that insurers have obligations to customers in financial difficulty, and that free, impartial help is available from charities such as Independent Age and Scope³¹. Cutting cover to save money is a bigger decision than moving the excess, and the poverty premium page covers the wider cost issues.