Insurance excesses are still misunderstood, new research shows

New data from Go.Compare car insurance has revealed that there is still a lack of understanding when it comes to motor insurance and, in particular, excesses.

It comes from new research from the comparison site which has revealed that, on average, just under half (49%) of those surveyed said they fully understood what voluntary and compulsory excess meant in relation to their insurance policies.*

That figure dropped further when it came to motorists aged between 18 and 24, as only 17% understood compulsory excess and 23% understood voluntary excess. And of those aged over 65, 74% said they knew what voluntary excess meant, with 73% saying the same about compulsory excess.

An insurance excess is made up of a compulsory and voluntary excess amount, included in most insurance policies like car and home. It means that if the policyholder needs to make a claim, the two are added together and must be paid upfront or deducted from any settlement in the event of a claim.

The compulsory excess is set out by the insurer and cannot be changed, but a voluntary excess is an amount chosen by the policyholder, often in exchange for a lower premium, and is payable on top of the compulsory excess.

The research also revealed that just under a third (32%) of those surveyed said they fully expected to pay an excess, while another 12% said they were surprised by how much the excess was. 10% claimed it was more than they thought they’d have to pay.

7% said they didn’t realise compulsory and voluntary excesses would be added together, with the same number saying it was either a nasty shock or that they couldn’t afford to pay it.

Commenting on the findings, Tom Banks, Go.Compare’s car insurance spokesperson, said: “Excess is clearly still one of the most misunderstood areas of insurance. No one wants to spend more time or money than they have to when they’re buying a policy, but it’s worth taking a bit of time over the details when you’re shopping around to make sure you understand what you’re purchasing as you could be in for a shock if you need to make a claim.

Tom added, “Understanding the excess you will need to pay if you need to make a claim is really important, and excess amounts can vary significantly. Our research revealed that if people had to make a claim tomorrow 8% couldn’t afford to pay it, with 40% saying they would need to dip into their savings and more than a quarter (26%) said they would use a credit card.

“Opting for a larger voluntary excess to get a cheaper policy, may seem like a good option but it is important to make sure that you could pay the excess if you had to. Comparing your options, taking into account the different excess amounts is a good way to make sure you are getting a policy that you understand and provides the cover you need.”

If someone then needs to make a claim on their insurance policy, the value of that claim must exceed the total excess. For example, if the voluntary excess and compulsory excess are both £250, the total excess is then £500, meaning the value of repairs in a claim must exceed £500 otherwise the policyholder would not be able to make a claim.

Drivers who purchase their car insurance through Go.Compare can benefit from its free £250 excess cover. Find out more here: https://www.gocompare.com/free-excess-protection-cover/.

For more information on excesses, please visit: https://www.gocompare.com/car-insurance/guide/excess-explained/.

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*These findings are from a study released by Sago between January 26-29, 2023, among a random selection of 2,219 of GB adults ages 18+ who are online panelists of Sago’s Community.

The results were weighted by age, gender, region, and ethnicity to match the population, according to Census data. For comparison purposes, a probability sample of this size has an estimated margin of error (which measures sampling variability) of +/- 2.5%, 19 times out of 20. Discrepancies in or between totals when compared to the data tables are due to rounding. Excerpts from this release of findings should be properly attributed, with interpretation subject to clarification or correction.

Sago is the global research and data partner that connects human answers to business questions. Combining a legacy of impact, global reach, and innovative spirit, Sago enables clients to solve business problems through extensive audience access and an adaptive range of qualitative and quantitative solutions.