If you’ve never had to make a claim on your home insurance, you might be unaware of the actual process involved.
Before agreeing to the terms and conditions of your home insurance policy, you will normally be asked a few questions in relation to your excess.
Essentially, if you make a claim under your buildings or contents insurance, your provider won’t pay out the full amount. Instead, they will pay the amount agreed, excluding your policy excess.
So, let’s say your excess is £200 and you make a claim for items that have been stolen for the value of £800. Your insurer won’t pay the full £800, but they will pay £600 – the amount with the agreed excess deducted.
Compulsory and voluntary excess
There are in fact different variations of excess. These are known as compulsory and voluntary. Both of these will be explained by your insurance provider and detailed in your policy terms and conditions documentation too.
For buildings and contents insurance it’s common to have a compulsory and voluntary excess. The difference can be defined as follows:
- Compulsory excess is the amount that you are obliged to pay when you make an individual insurance claim
- Voluntary excess is the amount you agree to contribute when making a claim
Your compulsory excess will depend entirely on your provider, so make sure you check the policy details first before taking out any form of insurance. A compulsory excess in the range of £50 to £300 is pretty common in most cases.
The purpose of voluntary excess
You might be wondering why you would contribute towards voluntary excess if you already have to pay a certain amount for your compulsory excess. Well, essentially, your premium will normally reduce if you decide to pay a higher voluntary excess.
The reason for this is because if you need to make a claim, the amount your insurance provider is liable to pay out will reduce. In contrast, if you only decide to pay a compulsory excess and you set the voluntary excess as zero, your premium is likely to be much higher.
Different excess amounts
For certain claims, different amounts of excess will apply. As an example, your compulsory excess for water damage caused to the home is likely to be a lot higher than claiming for stolen goods.
The excess for other areas such as subsidence is also likely to be much more, due to the amount associated with paying out for the damage to be covered. In order to understand the full amount of both compulsory and voluntary excess for each individual claim, it’s advised to speak to your insurance provider. Alternatively, you can check the small print on your policy documents for further clarity.
Remember that you will have to pay out if a compulsory excess applies to your claim. Where voluntary is concerned, bear in mind that your premiums are likely to rise if you wish to keep this excess amount at zero. In each case, it’s best to talk your options over with your insurance provider first, before you have peace of mind that you’re covered for the correct areas.