Excess insurance

A straightforward guide to covering your excess

Excess insurance is a simple product that reimburses the excess you pay if you make a successful claim on your main motor policy or car hire agreement. In plain terms, if your insurer deducts an excess from a payout, excess insurance can pay that amount back to you, up to the limit you choose. It is not a replacement for car insurance and it does not handle repairs. It sits alongside your main cover to reduce your out-of-pocket costs.

Why it matters in 2025: UK car insurance has become more expensive and excesses have been trending higher. Many drivers now choose a £500 voluntary excess to keep premiums down, even as average theft and accidental damage excesses have risen. Premiums have climbed sharply in recent years and remain volatile. London drivers, for example, typically pay more than other regions due to higher claim frequencies and repair costs. With costs shifting toward drivers, understanding how excesses work is essential.

This guide explains what excess insurance covers, where it draws the line, and how to choose sensible limits. We will use everyday examples to keep it practical, highlight the gaps that often catch people out, and share steps you can take to compare options safely. Insurance can offer real protection, but only when you know what is and is not covered. Our aim is steady, reliable guidance so you can make confident decisions.

Higher excesses can reduce premiums but increase your financial risk at claim time.

What it covers and how claims are settled

Most motor excess insurance is designed to reimburse the excess deducted from a successful claim under your primary policy. If your comprehensive insurer pays for accident repairs and deducts a £350 excess, your excess insurer can repay that £350, subject to your policy limit and terms. Some policies also cover excesses on fire, theft, vandalism, windscreen, or malicious damage claims, but always check definitions carefully.

Real-world example: Your voluntary excess is £500 and your compulsory excess is £200. After a parking collision, your repair claim is approved and your motor insurer applies a £700 total excess. If you hold an excess insurance policy with a £750 annual limit that includes accidental damage, you can claim back up to £700, leaving you net neutral on the excess cost.

Common exclusions include claims declined by your main insurer, unrecovered theft without a valid claim, driving without a valid licence, drink or drug offences, commercial use not declared, or wear and tear. Many policies exclude young driver additional excesses or increase the minimum claim. Car hire excess insurance typically covers damage to rental vehicles and high hire excesses, but it will not pay for items considered breaches of the rental agreement, such as driving on unapproved roads or using the wrong fuel.

Claims are usually straightforward: you pay the excess to your main insurer or hire company, then submit proof to the excess insurer. Payouts are generally made to you, not the repairer, and are capped by your chosen limit.

Who benefits most

Excess insurance can be useful if you carry a higher voluntary excess to reduce your premium, live in a higher risk postcode, or want predictable costs after an accident or theft. It is often considered by city drivers facing higher average premiums and by families insuring multiple vehicles, where total household exposure to excess payments can be significant. Renters of cars and vans also use dedicated car hire excess insurance to protect against large rental excesses.

It may be less necessary if your total excess is already low, you rarely drive, or you prefer to self-insure the risk by keeping savings aside. If you would not claim for minor damage, a high limit may be unnecessary. Balance the annual cost of excess cover against the likelihood and size of potential excess payments.

Picking a cover level that fits

1. Basic - single-claim focus

   • Annual claim limit: around £300-£500
   • Suitable for drivers with modest combined excesses who want protection for one typical claim. Fewer add-ons, may exclude windscreen or misfuel.

2. Standard - balanced protection

   • Annual claim limit: around £500-£750
   • A common choice as many UK drivers have combined compulsory and voluntary excesses in this range. Often includes accidental damage, fire, and theft excesses.

3. Premium - higher limits

   • Annual claim limit: around £1,000 or more
   • Useful if you carry a large voluntary excess or live in higher risk urban areas. May include extras like misfuel or vandalism excesses, subject to terms.

4. Car hire excess insurance

   • Covers rental vehicle excesses, often £250-£2,000
   • Can include multiple named drivers and worldwide cover. Read exclusions such as tyres, underbody, glass, and use off paved roads.

5. Optional add-ons

   • Windshield excess top-up, key cover, misfuel, and protected no-claims reimbursement where offered. Only add what you need to avoid overspending.

Tip: Choose a limit that comfortably matches your combined compulsory and voluntary excess, not just the voluntary portion.

What it costs and what affects the price

Prices vary by insurer and underwriting. Treat these as broad indicators, not guarantees.

Who can apply and what insurers look for

Most UK residents with a valid driving licence and a motor insurance policy can apply for excess insurance. You will usually need to confirm that your primary policy is active, the vehicle is roadworthy and used for declared purposes, and that named drivers meet age and licence requirements. Insurers may ask for your policy schedule, proof of address, and a driving history declaration.

Common reasons for decline include undisclosed modifications, commercial use not declared, multiple recent claims, unspent motoring convictions, or extremely high primary excesses outside the insurer’s limits. Policies often have maximum annual claim limits and may restrict young driver additional excesses. For car hire excess insurance, you may need the rental agreement and proof of payment of the hire excess before reimbursement can be made.

The process in simple steps

1. Get a quick quote by selecting your desired annual claim limit.
2. Check inclusions - accidental damage, theft, fire, windscreen - and exclusions.
3. Confirm your combined compulsory and voluntary excess on your main policy.
4. Buy cover that matches or slightly exceeds your total excess exposure.
5. Keep policy documents and your main insurer’s schedule together for reference.
6. If you claim, pay the excess to your motor insurer or hire company first.
7. Submit documents to the excess insurer for reimbursement up to your limit.

Balanced view - advantages and trade-offs

Key checks before you commit

Confirm the total excess on your main policy, including any young driver, theft, and windscreen amounts. Review the excess insurance claim limit and whether it is per-claim or per-year, as this affects how many incidents are covered. Read exclusions closely, especially for drink or drug offences, undeclared commercial use, and wear and tear. Check waiting periods or cooling-off terms, and whether claims within the first few days are covered. Make sure your details match across policies to avoid delays. Finally, look at renewal pricing and cancellation terms, and keep invoices and claim correspondence ready to speed up any reimbursement.

Alternatives and related protection

1. Lower voluntary excess
   • Reduces what you pay at claim time but usually increases the annual premium.
2. Protected no-claims discount
   • Helps keep future premiums stable after a claim, though it does not remove the excess.
3. Telematics or pay-per-mile insurance
   • Can lower premiums for lower-risk or low-mileage drivers without changing excess.
4. Breakdown cover with misfuel or key add-ons
   • Addresses specific risks without altering your motor policy excess.
5. Emergency savings fund
   • Self-insure the excess by setting money aside if you prefer fewer policies.

Frequently asked questions

Q: Is excess insurance the same as comprehensive car insurance? A: No. Excess insurance reimburses the excess you pay on a successful claim under your main policy. It does not replace motor insurance or pay repair bills directly.

Q: How much cover should I buy? A: Choose a limit that covers your combined compulsory and voluntary excess. Many UK drivers hold limits between £500 and £1,000, reflecting common excess amounts and rising costs.

Q: Does it cover every type of claim? A: Only if your main insurer accepts the claim and it falls within the listed sections such as accidental damage, fire, or theft. Exclusions and limits vary, so read the policy wording.

Q: What about car hire? A: Car hire excess insurance can reimburse the rental company’s excess, often between £250 and £2,000. It typically sits outside your personal motor policy and has its own terms.

Q: Will it affect my no-claims discount? A: Claiming on excess insurance usually does not affect your motor no-claims discount because you claim after your main insurer settles. Always confirm with both insurers.

What you can do next

Review your current motor policy to confirm total excesses and how they apply by claim type. Decide whether you prefer to pay a lower premium with a higher excess or keep out-of-pocket costs smaller. If excess insurance suits your needs, compare limits, exclusions, and prices from several providers and keep documents to hand. Take your time - you are in control.

Important information

This guide is general information, not personal financial advice. Cover, exclusions, limits, and prices vary by insurer and may change. Always read the policy wording and your schedule carefully, and consider seeking regulated advice if you are unsure.