You can insure your policy excess – but should you?
Insure your excess?
Many of us will accept a sizeable excess on a policy if it means the premium comes down.
An insurance excess is helpful to the insurer as it means claims on the policy are reduced. Someone with £800 worth of damage and a £500 excess is unlikely to claim on the policy for fear the premium will increase next year.
Insurance excess works both ways: for you as the premium is reduced; and for the insurer as you are less likely to claim. Then someone suggests insuring your excess. Such an offer was made to me in an email from Warranty Direct.
So should I buy excess insurance?
Remember my golden rule – do not buy the headline, read the policy.
The Key Facts for motor excess cover tell me what is NOT COVERED:
- Any claim less than the policy excess of the Motor Insurance Policy
- Any loss declined by the Motor Insurance Policy Insurer
- Any losses that occurred before the inception date of this policy
- Any payment under this policy that exceeds the annual aggregate limit
- Excesses payable following loss or damage to a vehicle windscreen under a Motor Insurance Policy
- Any Excess that would be recoverable from a third party
- Claims that arise during the course of the Policyholder’s business.
That is quite a list and I estimate it takes care of at least half of the likely claims which could be made. For example many accidents are the fault of someone else, so you have to claim your excess from them, not this policy. It also says no to payment if the total claim is below the value of your policy excess.
I am not suggesting any of these exclusions are unfair, or there to catch you out, but you should take them into account when deciding to buy, or not. An insurer has to state when it will and will not pay, as that allows the premium to be set.
The policy also offers cover of the excess you have agreed on other insurance policies.
So like many insurance offers it looks a good idea, and the premium is not high. Weigh it up this way:
- What was I thinking about when I set my policy excess levels in the first place?
- Can I afford to pay my insurance excess levels?
- Will I claim on my policy if the loss is around the level of my excess?
The answers to those questions should help you decide. I decided not to buy the insurance, but it may suit you.
Its dull I know, but read the policy and not the headline.