The level of excess has a direct impact on your premiums, and you need to ask yourself a series of questions when deciding on an acceptable level.
What is ‘the excess’?
The excess is the first part of any claim which the insured (i.e. you!) has to pay in nearly all claims.
While polices have a minimum fixed level of excess, the policy holder is usually given the chance to choose to increase this if they so wish. This is most often done when a policy is first taken out, but can sometimes be changed during the policy term, but doing so could increase or decrease the home insurance premiums, depending on whether you choose to raise or lower it.
So, for example, a policy might have a fixed level of excess which is £100. However, you might be able to increase this to as much as £500. You would then have to pay out the first £500 of any claim you make. This obviously decreases the potential financial cost to an insurer, so they would lower your premiums in return.
Why you shouldn’t necessarily choose the highest possible level of excess
Some people simply opt for the highest level of excess possible, to keep the cost of cover down.
However, if you aren’t particularly well off, and, for example, have a bicycle stolen which costs £600 to replace, the insurer is only going to pay out £100 and you’ll have to cover the rest, which you may not be able to do, or at least it might seriously hurt you financially.
If the difference in premiums is perhaps just a few pounds a month between having a £500 level of excess and a much lower excess of, say, £100, is it worth the financial risk of having to pay out such a large sum in the event of a claim for the sake of a few pounds a month?
How important are lower premiums to you?
This touches on another crucial question you have to ask yourself when deciding on the excess. How important is it to you to save each month?
Some people are on very tight budgets and even a few pounds saved every month is important.
Others might feel that they’re extremely careful and risk-averse. They may pay a great deal of attention to looking after their properties and maintain a high level of vigilance at all times when it comes to security and looking after possessions.
If you’re one such person, you might have good reason for choosing a higher level of excess. However, you still have to ask yourself if you could afford the excess in the event of claiming.
Others might feel that given their previous claims history it could be a good idea to maintain a lower level of excess.
Other key questions to ask yourself
You should also take into account other factors which impact on your own level of ‘risk’ and likelihood of having to claim, and ask yourself questions regarding them:
- Type of property – The type of property you own and where it’s located is one such factor. Is it very old? Does it have a history of things going wrong? Is the boiler and heating system old and a little worn out? What sort of security does it have? What’s potential for burglary in your area? Is flooding potential issue?
- Personal factors and circumstances – Personal factors and circumstances such as whether you have children (more likely to break things), perhaps how old you are, if you have lodgers, if you’re often away from home for the night or longer periods, should also be taken into account.
- Your possessions – The sort of possessions you own also come into it; do you have a lot of valuable and easily damaged items? Do you own a lot of hi-tech gadgetry? Do you collect antiques or other valuable items? Have you a fair amount of expensive furniture?
If you think long and hard about your priorities, property, possessions and personal circumstances, it should help you come to a sensible decision about how much excess you want to pay and whether this might perhaps be more than the fixed minimum that the insurer stipulates.
We have a real passion for making sure people get the cover that’s right for them. We’re driven by a desire to help you find not only the best value insurance, but the right insurance for your individual needs. For more information speak to one of our experts on 0203 014 9300 or email email@example.com