Home Insurance Excess: Is lower better?

One of the main ways of reducing the cost of Home Insurance premiums is to opt for a higher level of excess, and many people do.

But is it a false economy? Would most of us in fact be better off paying a little more and choosing a lower level of excess?

What is insurance ‘excess’?

The excess is the amount an insurance policy holder (i.e you!) has to pay towards the cost of any claim before the insurer covers the rest.

Policies nearly always have a built-in, standard level of excess, which is generally set quite low; £50 is a common sum in many home cover deals.

However, you usually have the option of choosing to increase the amount you pay towards a claim in return for lower premiums. The maximum voluntary excess you can set varies by insurer, but can be as much as £1,000 or more.

The pros and cons

The pros and cons are fairly simple, and largely come down to cost. However, if you do opt for a higher level of excess, the savings you can make on premiums aren’t usually worth the increased financial risk you’re taking on. And you can also be caught out if your financial circumstances change:

The pros:

– If you’re pretty certain you’re not going to claim on your insurance, then in the long run you’ll arguably save money by having a higher than standard excess.

– If you can comfortably afford to pay the higher level of excess you’ve chosen, it means you can keep the savings you make, potentially in a higher interest savings account, until such times as you might need them to cover the excess on a claim.

The cons:

– You might set a level of voluntary excess that is so high you’re unable to cover it in the event of a claim, wiping out by far any savings you might have made on your premiums, possibly even if you’ve made those savings over a long period of time.

– If your personal circumstances change and your income goes down, but you forget to change your level of excess at policy renewal time, you could be in for a nasty shock if you have to claim.

– How you pay the excess varies depending on the insurer. Some take it out of any claim settlement paid out (if it’s a cash payment). But many insurers don’t, and in fact ask for payment up front, which would impact on your claim if you couldn’t come

Policy Expert

Policy Expert is an online Home Insurance broker, dedicated to helping customers find the insurance policy that’s right for them. Our customers are at the heart of everything we do, so we have a team of experts with a real passion for making sure people get the cover that’s right for them. Policy Expert is driven by a desire to help you find not only the best value insurance, but the right insurance for your individual needs. To speak to one of our experts, call 0203 014 9300 or email ask@policyexpert.co.uk

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