Compulsory v Voluntary
There are two types of excess, compulsory excess and voluntary excess.
Compulsory excess is set by the insurance company. Not every policy will have a compulsory excess but most do.
Voluntary excess is agreed between the parties. When you buy cover, you will usually be offered the option to pay more in the event that you make a claim. This is on top of the compulsory amount already set by the insurer. This extra amount is known as voluntary excess. Some insurers will allow up to an extra £750 of voluntary excess.
You might think, ‘why would you offer to pay more excess?’ The answer is that the higher the voluntary excess, the lower the premium could be.
There is clearly a balance to be struck. On one hand, increasing the excess will help save you money on the premium. However, in the event of a loss you need to be able to afford the excess.