Looking to invest in car insurance in Auckland alongside your new car purchase? Before signing on the dotted line, it’s vital to read through all the terms and conditions of your car insurance plan. In doing so, you will probably come across car insurance excesses, and may have a question or two about them. What exactly are they, and how does an excess work? We explain the basics of car excesses and what you need to know about them.
What is a car insurance excess?
An insurance excess is the amount you pay if you make a claim with your car insurance. If you make a claim that’s accepted, your insurer will pay the repair or replacement costs, which are over your excess amount. Let’s say someone hits your car by accident in a parking lot. And your excess is $400, you’ll be required to pay $400 to the repairer when you collect your car.
Types of excess
There are multiple forms of excesses. Here, we break down each so that you know their differences:
- Standard excess – This is the insurer’s standard policy excess for the type of insurance. Most car policies will have a standard excess of $400 or $500.
- Voluntary excess – There are car insurance companies that will allow you to increase your excess amount in exchange for a reduction in premium. If you have a $400 standard excess, and $400 voluntary excess, you are more likely to pay the cost of small claims yourself, rather than making a claim, and this drives down your insurance premium.
- Age-related excess – if the driver of the car is under 25, an age-related excess will apply if they are involved in an accident while driving the car. The amount will depend on the driver’s age at the time of the accident. This type of excess is designed to protect and compensate the insurance company for the higher risk associated with a younger driver.
Purpose of paying excess
Having to claim on your car insurance can be a stressful ordeal, and you may be surprised to find you have an excess, especially when you have to pay more than expected. But in reality, the excess helps keep the cost of handling and meeting insurance claims down, so that the premium you pay is cheaper.
Whenever you make a claim, you’re required to pay the excess except when stated otherwise. For example, there are many Auckland car dealers who provide insurance policies that allow you to select the optional windscreen and windows cover. This means no excess will apply if you claim a broken or chipped windscreen.
Additionally, it’s important to know that you need to pay the excess regardless of whether you, someone else, or another external factor caused the damage. If you’re not at fault, your insurance company will still charge you the excess, and chase the responsible party later on to refund you.
How much excess do I have to pay when I make a claim?
The excess will depend on what is stated on your policy documents, so you should thoroughly review your policy to get an idea of what you need to pay when you need to make a claim to avoid surprises. It’s also vital to make sure you sign a car insurance deal that clearly outlines cover, excesses, and payment terms in the first place. If you can’t find information on any of these, talk to your insurer.
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