Insurance excess

What does insurance excess mean?

You agree to pay a fixed sum when you make a claim on your insurance policy. The insurance company will pay losses beyond that excess figure.

We tend to chose an option to reduce our insurance premium. Insurance companies like an excess as it puts you off claiming unless the sum involved is large. Excesses avoid small claims for broken lights and dented bumpers. Excesses save the insurance company money and expensive office work.

So everyone one is happy until a claim has to be made. When an insurance claim has to be made you need to know the score. Most people’s first thought after an accident is to contact their own insurance company. Yes your insurance company must be informed, but you do not need to make a claim.

Your Key says contacting us first on 08000 114 114 is the best course because:

• Our independent experts will assess if someone else is to blame and claim the expense and loss from their insurance company, and not from yours.
• Claiming on your own policy, even when someone else is to blame, can ruin your claims history.
• If you claim on your own policy you will have to pay out the excess.
• Your own insurance company may not chase the party to blame for their outlay.

You must understand the economics which sit behind this rather surprising position. Your insurance company is not your representative. It is an insurance company which has agreed to pay out in certain circumstances. Insurance companies like to keep admin costs to a minimum, so many do not like to chase other insurers for their outlay and your excess.

All legal cover policies are based on the ability to have legal costs paid by the party at fault if the claim succeeds, and the legal cover picks up those legal costs if the claim goes wrong. If there is no chance of the legal costs being paid by the other side then the legal cover will not support your claim. Legal cover insures the risk of you losing your claim rather than paying your legal costs outright.

So when can you not recover legal costs?

If there is no injury, and the financial loss is below £5,000 your case falls into what is called the small claims category, and legal costs cannot be recovered from the party to blame.

If your injury is not worth £1,000 in compensation value, and the financial losses are worth less that £5,000, legal costs cannot be recovered.

If your injuries are worth more than £1,000, and the injury does not have to be too serious to be worth £1,000, then legal costs can be recovered from the party to blame if the claim for compensation is successful.

The Your Key legal cover is for any accident where an injury is suffered. We will help you recover compensation for the injury plus any financial losses, including your insurance excess.

We can suggest two alternatives where there is no injury, and the financial losses are worth less than £5,000. Both mean someone else handles the case for you, and this is important as it is best if you know the ropes.

First suggestion is to use credit repair for your vehicle. The credit repair company we use will assess what happened in the accident. If someone else is to blame the credit repair company will collect and repair your vehicle and send the bill direct to the insurer of the person who caused the accident. All the work is done by the credit repair company, and they will even inform your own insurer.

The second option is credit hire. If you have been involved in an accident, your vehicle is out of action, and there is no reasonable alternative available, then a credit hire company will hire a vehicle to you, and just like a credit repair company the bill will be presented to the insurer of the person who caused the accident.

Both repair and hire can be carried out on credit, and within recovery of the repair and hire costs your excess can be included.

Credit repair and credit hire have sometimes been had a bad name. Some credit companies have tended to allow hire to last too long, or to hire an unreasonably expensive vehicle. These problems have been overcome by agreements between the insurance and credit hire industries. Procedures and cost agreements are in place and for you that means a quick service and no need for you to pay anything, not even your excess.

Compare that to making a claim to your own insurance company when someone else is at fault. Yes your insurance company will sort out the repair, and might even arrange a courtesy vehicle, but you will pay out your excess. If your insurer does not chase the insurance company of the person to blame you are out of pocket, not once but twice. First you pay the excess, and because the insurer has paid out your claims record is damaged. Not all insurance companies claim from other insurance companies, and even if they do they tend not to include your excess. That will not feel fair but it is a very regular problem. The reason is that most people call their own insurer after an accident, and they do what you have paid them to do, they repair or pay for the value of your vehicle.

To avoid these problems you must get independent help and support, and that is exactly why Your Key exists. Armed with the right advice you can deal with your problems without unnecessary cost and anxiety. This is the time to know the score, the time for independent accident advice and support from Your Key.

Comments

1. Mark B Says:
   February 24th, 2012 at 10:53 am

   Hello yourKey,
   Please can you advise. Rcently had to claim through Bennet bike insurance. However I am having problems claiming my £500 excess back as I have now been told that I dont have Legal cover. Hopefully this is where yourkey will be able to help??

2. Mark Thompson Says:
   February 28th, 2012 at 10:58 am

   Dear Mark,
   I need more information to see if we can help. I suspect you have fallen into the same trap as other members. Have a look at these links:

   http://www.yourkey.info/frontend/wordpress/christine-and-her-uninsured-loss
   http://www.yourkey.info/frontend/wordpress/?s=claim+my+excess

3. Mark B Says:
   March 1st, 2012 at 11:02 am

   Initially my bike had paint damage caused by contractor working for College where bike parked during course. Spoke with owner who said he would clean bike and remove paint. Following this cleaning bike looked as if it had been cleaned with a brillo pad and scratched to bits all over. Obviously not happy and got his insurance details etc and decided to go through my insurance as Bike specific. Called Bennetts was told going through my insurance would be the best way forward as guaranteed repairs carried (cannot complain with regards to repairs, first class) Was told to pay excess on return of repair and thought that insurance company would deal with everything as fully comp, that was the impression I was given by Bennetts?? However when I called Bennetts they said I did not have legal cover and would have to claim back my self or call Broker (Equity Red Star). I always thought if 3rd party admitted liability and repairs were fully paid by 3rd party insurance I would then get my Excess repaid and would not loose my no claims etc. Thats what you have Fully comp for or so I thougth. I am not sure as to extent of repair costs. However the bike received a full respray including frame, new screen. Was also suggested by Bennetts to call 3rd party and ask for excess payment, cant believe thats correct advice.

4. Mark Thompson Says:
   March 2nd, 2012 at 11:08 am

   Dear Mark,

   Your understanding of how insurance claims work is typical of the misunderstanding and assumptions most people make.

   Insurance companies and brokers have made themselves into advisers, when they are no such thing. An insurance company sells you a contract of insurance to cover certain losses, and that’s it. An insurance broker is a middle man who arranges insurance for you. Neither are your representative, and they are not your independent adviser.

   So looking at your problem. Someone has damaged your bike, and you want it repaired. You have not been involved in an accident which means our legal cover does not apply, and the same would be true of any other legal cover bought with your vehicle insurance. These legal cover policies are intended to allow you to seek compensation after an accident where someone else is at fault. The policy covers your risk of having to pay legal costs if something goes wrong in your compensation case. So the first point is that your case does not fall under legal cover.

   Your own broker, Bennetts, should have made it clear you had two options. The first was to claim directly from the person who caused the damage, and you would have claimed for the cost of repair, and possibly for alternative transport if your bike was your only transport. Option two was to claim on your own comprehensive policy. The benefit was a quick good quality repair, and the downside was paying your excess and damaging your insurance record.

   Very few insurance companies recover their expenditure from other insurance companies, and very few would include your excess and uninsured losses. They certainly would not take up a claim on your behalf. I suspect you assumed they would sort it all out for you, but I repeat that insurance companies are not there to represent you. Your only option is to make a claim against the person who did the damage, and try to recover your excess and any uninsured losses, plus your insurance company outlay, as you will only repair your insurance record if they get their money back. Insurance records are based on claims and payment, not on fault.

   Unless the amount involved is more than £5,000 you cannot recover your solicitor’s fees, so I think you will have to bring the case yourself. It can be done, it just requires the ability to write a good letter or three, and the tenacity to keep after the person responsible and their insurance company. The process is described on our website at http://www.yourkey.info/frontend/wordpress/i-just-want-to-claim-my-excess and http://www.yourkey.info/frontend/wordpress/making-a-small-claim

   So what might Your Key have done if you had contacted us first?

   I cannot say categorically that we could have helped you, but I will tell you about a member called Bevan who we helped recently. Beven’s bike broke down and the AA were called. They sent out a contractor with a recovery truck to collect the bike. The bike was not properly strapped down so fell and was damaged. Bevan arranged the repairs but he needed a bike to get to work, an dthe AA were very slow dealing with the obvious problem. We arranged a credit hire motorcycle and the cost was paid by the AA, along with the cost of repair. No claim had to be made on Bevan’s insurance policy, so no excess payment and no damage to his insurance record. We were able to help Bevan as his problem was caused by an outfit with the administration and means to pay. If the person who caused your problem had the means to pay, or insurance then we could have done something similar for you.

   So I am afraid you are left with only one option, that is to make the claim yourself against the person who caused the damage. The links above show you how it is done. Another member, Christine, is in a similar situation - http://www.yourkey.info/frontend/wordpress/?s=christine

   I hope this helps and do let me know if you need any more help.

5. Mark B Says:
   March 2nd, 2012 at 3:47 pm

   Hello Mark,
   Thanks for the reply and certainly explains a few things with regards to Brokers and insurance companies. In the long run an expensive lesson learned at present. However I am a stubborn person and will try to chase down my £500 excess and will try to ruffle a few feathers along the way. As you say even if I had Legal cover I would still be in this position.
   No problems using my expeariance on the web site and will certainly post on our local Bike forum also.
   Once again thanks for your help and will let you know if I manage to sort something out.
   Cheers for now,
   Mark

6. Mark Thompson Says:
   March 2nd, 2012 at 4:09 pm

   Dear Mark,

   I have posted our exchange at http://www.yourkey.info/frontend/wordpress/insurance-excess#comment-5612
   That should save you having to set out your story at great length.

   Our exchange fits in with a pattern I have seen for some time. Legal cover is not really the answer, as the most important thing is to get independent advice.

   The usual thing people do is to phone their own insurer. The insurer then puts the necessary steps in place without explaining the consequences, and you drop out at the end of the process having paid your excess plus other uninsured losses on top.

   Your misunderstanding of legal cover is caused by the way legal cover is oversold. It is sold as the answer to recovering uninsured losses, but the system only works if those losses are part of a larger compensation case with a value above the small claims limit of £5,000, or a case involving an injury worth at least £1,000. So the legal cover only helps if you have a good case, and the value is high enough to allow solicitors costs to be recovered from the party to blame. I have yet to see a policy with more generous terms.

   So why is legal cover sold? The answer is money. The current high cost of legal cover is used to recoup some of the discount offered on insurance premiums. It also attracts calls after accidents and the insurance companies and brokers get referral fees from solicitors. As the law stands today you do not need legal cover as you can buy insurance when you make a claim, to cover the risk of paying legal costs, and the cost of the policy is included in the costs recovered in the compensation case.

   Your Key has offered free legal cover, as it is our way of saying you do not need an over-priced policy, but looking ahead I think we will concentrate on giving independent advice.

   I will be interested to hear how you get on, and do not forget the small claims guidance at http://www.yourkey.info/frontend/wordpress/making-a-small-claim

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