Higher Voluntary Excess
You may ask the question, and rightly so, “Why are there so many terms in car insurance; could they not make it any easier?” Well, until someone designs the perfect car insurance product the best you can do is to equip yourself with as much knowledge on the subject as is possible. Before we answer the question about a higher voluntary excess let’s review the different types of excess applicable in car insurance.

What is excess again?
The excess amount can best be described as your share of the loss or damage. Also known as the first amount payable, you are responsible to pay the excess while the insurance company is responsible for the balance of the claim. The standard or compulsory excess will be specified in your insurance schedule and it is important to familiarize yourself with the various amounts of excess payable. The excess will differ depending on the type of loss – if your car is stolen the excess amount will be much higher than if you claimed for a cracked windscreen.

Some insurance companies also offer a fixed excess where you will pay the same irrespective of the type of claim. Then, there is the additional excess. This excess is, as the name indicates, in addition to the normal or first excess! In certain cases such as for drivers younger than 25, the excess in case of a claim will be higher. Also, if someone else drove your car, even with your permission, and is involved in an accident, an additional excess will be asked by the insurance company.

Voluntary excess
Now, the voluntary excess. Your insurance company can give you the option of paying a higher excess than the standard excess. If you accept to pay a higher voluntary excess you must remember that this amount is in addition to your standard excess. If your standard excess for theft was R1 000 and you accepted a voluntary excess of R5 000 you will have to pay 6 000 in total in the case of your car being stolen and not recovered. If you have any other conditions applicable, such as being younger than 25, that additional excess will also be added.

Is there a benefit?
So, looking at the facts, is there any benefit in accepting a higher excess? At the end of the day it will depend on your own personal circumstances and risk profile. When you do accept to pay a voluntary excess you will be given a discount in your monthly premiums, so find out from your insurance company or broker what the difference will be. Then you need to make some calculations and weigh up the pros and cons applicable to your own situation.

What should I do?
If you fall in a low-risk category, for example, you work from home, only use your car to fetch kids from school, go to the shops and your car is kept in a locked garage all the time, you could seriously consider accepting a higher voluntary excess as your likelihood of being involved in an accident is much lower. If you are really prudent you can put the savings from the reduced premiums in a savings fund for emergencies. Accepting a higher voluntary excess can also be described as a form of self-insurance as you are now accepting a bigger portion of the risk.

On the other hand, if you fall in a high-risk category, for example having to drive vast distances on a regular basis, or work and live in areas that are notorious for carjackings or theft, you may be better off not accepting a voluntary excess. The big thing is to make sure that you can afford the higher excess and not end up in a situation where you can’t have your car fixed after an accident because you do not have the funds for the voluntary excess you have accepted.

In conclusion, whether you will save money by accepting a higher voluntary excess will depend on your choice, circumstances…and unfortunately chance. Accidents happen, cars get stolen, that is why we take out car insurance after all.

The choice is yours.