Your home insurance voluntary excess is the amount that you will pay out of your pocket, before receiving claims money from your insurer. You pay a voluntary excess on top of any compulsory excess set by your insurance company. The level of voluntary excess that you select for your policy should depend upon your level of savings; the worst thing you can do is try to get a cheaper policy by choosing a voluntary excess that is not affordable.
So how do you decide how much voluntary excess to pay on your home insurance?
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What is a home insurance voluntary excess?
The voluntary excess on your home insurance is the amount of money that you will need to put towards any claim that you make. For example, let’s consider a situation where you have to make a claim because of flooding damage that amounts to £20,000 and your voluntary excess is £500. In this case, you would voluntarily pay £500 and your insurance provider would pay the remaining £19,500.
Your voluntary excess can be as low as zero, and it applies to both your buildings and contents insurance. The same applies to your car insurance policy. You pay your voluntary excess on top of any compulsory excess that is set by your insurer.
What is a compulsory excess on my home insurance?
A compulsory excess on your home insurance policy is the amount set by your home insurance provider, and can vary depending on the type of claim you are making. The compulsory excess tends to be higher on more substantial claims than smaller ones.
For example, a claim relating to the subsidence of your home would typically attract a higher compulsory excess than a claim relating to a spillage which damages a carpet.
Why do insurers include an excess on home insurance policies?
Insurers make money when they pay less out in claims and the running costs of their business, than they receive in premiums. Charging customers an excess when making a claim on their insurance policies tends to discourage people from making a claim for inexpensive items to fix; in those situations, customers will find there’s no financial benefit to claim once they account for the insurance excess.
It also is a deterrent to fraudsters who are considering making false insurance claims.
How does my voluntary excess affect my insurance premiums?
Typically the higher the voluntary excess that you select, the less of a risk that your home or car insurance provider will see you as. So a higher excess should reduce your home insurance policy premiums.
How much voluntary excess should I pay towards a claim?
How much you decide to contribute towards your insurance excess should depend on the amount of money you have in savings. It’s impossible to know if you will need to claim on your insurance in the future, so make sure that any amount that you agree to contribute to future claims is affordable to you. Ideally you’ll have this money in a savings account or an emergency fund.
Relying on a credit facility such as a credit card, to fund any future insurance claim, could put you into debt. Although a lower premium can be attractive, you’re better off picking one that is affordable.
Is it better to have a higher voluntary excess?
If you select a higher voluntary excess, then you are likely to get lower quotes for your premium, and you’ll have the best experience if you don’t need to claim your insurance. Overall you will have saved money.
If you opt for a higher excess and then have to make a claim, you’ll have to pay a compulsory excess plus this voluntary amount, which could more than wipe out the saving you received on your premium.
As we can’t predict the future, you need to know that any home insurance excess you sign up to, is affordable. Ideally you’ll have the money sitting in an instant access savings account if you need to make a claim.
How else can I reduce my home insurance premiums?
There are many ways to reduce the amount you pay on your home insurance policy, including:
- Shopping around to find the cheapest insurer for your needs, by using a price comparison site
- Increasing the security on your home, for example, by fitting locks that meet security specifications
- Get a quote for buildings and contents insurance together
- Don’t over-insure your building and possessions – use a tool to get the right level of cover for your needs
- Pay the cost in full, rather than by instalments
- Calculate the cost of claiming before contacting your insurer to make a claim for something your policy covers
- Consider affordable excesses
- When deciding to buy or rent a property, considering the level of crime in the area
For a full, free guide to how you can save money, see our article on Tips to Save Money on Home Insurance.
What other insurance policies have a compulsory and voluntary excess?
Most insurance policies have an insurance excess comprised of a voluntary element and compulsory element in the event of a claim. These types of excess apply to:
- Home insurance
- Motor insurance
- Travel insurance
- Pet insurance
Conclusion: pay what you can afford
There are two types of excesses involved in most insurance policies; voluntary and compulsory.
The difference between compulsory and voluntary excess is:
- Your insurer sets the compulsory excess
- Voluntary excess is what you offer to contribute towards your claims, on top of your compulsory excess.
The best guide to selecting the appropriate level of cover is to choose an excess that is affordable to you; ideally, an amount that you can easily cover from your savings. In that case, if you don’t have to claim, you save some money, and if you do, it’s not the end of the world because you have the finances available.
What are your experiences with home insurance excess?
Have you found that you get a lower home insurance premium with a higher voluntary excess?
What are your top tips for saving money on your insurance policies?
We’d love to hear from you in the comments below.
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