Little wonder, then, that if you have to claim forking out for the excess can be a bitter pill to swallow.
The good news is that there is a way to protect yourself against this painful cost: an excess insurance policy. We take a look at how excess insurance coverage works and what you should look out for.
What is an excess?
When you take out an insurance policy, the company will stipulate a minimum sum which must be paid by you in the event of a claim. This sum will be appropriate to the type of insurance you are taking out. For example, for motor insurance the excess could be £300 but for small kitchen appliances, it may be just £20.
The excess is paid by you as the policy holder and will either be deducted from the value of an item (such as a car which is being written off) or will need to be paid upfront (to the mechanic if a car is being repaired for example).
This can leave you seriously out of pocket, or could make a claim simply not worthwhile. After all, if your car costs £350 to fix and there's an excess of £300, it might seem like a lot of fuss and hassle for just £50.
Having insurance on excess can make a claim far more attractive as the whole amount would be paid out (£350 in the example above).
How excess insurance works
If you opt for insurance excess cover, you will still need to make sure you have enough funds to temporarily cover your excess. You can then submit your claim to the company that provides your excess waiver insurance you will be reimbursed up the limit on your policy.
Cheap excess insurance can be found for all types of cover including motor, home, travel, pet and healthcare. The principle works in exactly the same way regardless of the type of insurance.
If saving money is your main goal, carrying out an excess insurance comparison is essential. This will help to identify the cheapest excess insurance cover. Once you know roughly how much it will cost, you might wish to compare the premium to the money you could save by increasing the excess on your insurance.
What to look for
Your excess reimbursement insurance will have a maximum limit which you are covered for; in order to make sure you don't end up out of pocket, it's important to make sure this is the same amount or higher than the excess of your insurance policy.
You can buy an excess policy for single use; this would typically be motor insurance excess cover, particularly if you are renting a vehicle. Collision waiver excess insurance or CDW excess insurance will most likely be offered to you by the car rental firm. Although it is possible to insure your excess at this point, the chances are you will pay far less if you compare excess insurance and take it out in advance.
Damage excess refund insurance is worth considering if you are renting a vehicle; if you have a collision which you are at fault for, you could end up having to pay a substantial sum in excess charges even though you no longer have the car.
Excess waiver insurance isn't just applicable to cars, it's available for all types of insurance. But rather than guarding against the excess on all of your policies individually, you can take out something which is known as a lifestyle policy. This protects the excess on a wide range of insurance policies simultaneously, which can not only work out cheaper but means you don't end up with a large amount of excess policies which you never claim on.
If you decide a lifestyle excess policy is right for you, make sure you think carefully about how much protection you need. Then insurance excess policy maximum applies to the payout in any given year. This means if you claim once for your excess to cover your car insurance, if you have used up your whole allowance, you won't be able to claim again in that policy year.