What's the difference between voluntary excess and compulsory excess on your home insurance policy? Here's a guide to the excess and what it means if you need to claim.
What is home insurance excess?
On your home insurance policy, you'll probably have seen the term 'excess' mentioned. This is the amount of money you'll pay towards a claim before your insurer pays out the rest.
There are two types of excess: compulsory excess and voluntary excess.
This is the amount set by your insurer that you have to pay if you make a claim. You can't change this amount or choose not to pay it – it's part of your policy.
Insurers can have different compulsory excesses, and some are as low as £50.
You choose the level of voluntary excess when buying or renewing your home insurance policy. It's the amount that you want to pay towards a claim.
You can choose from zero to about £500, for the buildings cover and the contents cover separately, depending on your circumstances.
Any voluntary excess will be added to the compulsory excess.
Should I pay a higher voluntary excess?
Choosing to pay a higher excess might seem strange, but it usually reduces your premium. With a higher voluntary excess, the insurer has less to pay if you make a claim.
But a high excess will only save money if you don't make a claim.
If you choose to pay zero excess the premium is typically more expensive, especially for buildings cover. It's important to set a limit which is affordable for you.
If you can't afford to pay out a big lump sum on a claim, there are other ways of reducing your premiums.
What should my excess be on a typical claim?
Home insurance comes in two options – buildings and contents – and depending on the cover you choose it can protect you from all sorts of issues like loss, damage and theft.
You need to be aware that some cover issues come with a higher compulsory excess. For both buildings and contents policies, a claim for 'escape of water' has a high excess. While for buildings insurance, subsidence, heave and landslip have a very high excess. In these cases the excesses reflect the expensive cost of repairs.
Damage caused by a flood is different to a burst pipe or other type of water leak claim and is usually included in your standard cover excesses. But if you live in a flood risk zone, your insurance quotes could be higher anyway.
You can find the compulsory excess values for contents or buildings claims in your policy documents.
How much excess will I pay if I make a claim?
Your total excess is the sum of the the compulsory and voluntary amounts on your policy.
So if your policy has a compulsory excess of £200 and you added a voluntary excess of £100, you'll pay £300 towards a claim.
For example, if you make a claim for £1,500 you'll receive £1,200, with the insurer keeping £300 to cover the total excess.
However, if the claim was for escape of water on both your buildings and contents policies, each with a £250 compulsory excess and a £100 voluntary excess, you'd receive only £800 from a total £1,500 claim.
How can I get the best value policy?
Some insurers may charge only one excess if your claim involves both of the buildings and contents policies, whereas others will apply the excesses separately. The procedure varies by insurer and this is one thing you should check before you buy.
And when shopping around for your home insurance, be wary of policies with a cheap premium based on a higher voluntary excess. Remember, you'll have to pay this excess if you make a claim so make sure you’re happy with the excesses before you purchase.
Have a look at the cover levels we can offer you on our home insurance.
Published: 19 May 2020
Author: Jim Hunt