Drivers confused by car insurance excess – how to set the right amount

Most drivers – especially younger drivers – don't fully understand how car insurance excess works, research by Go Compare shows. 

When you take out an insurance policy, you'll almost always need to set an excess. This is the amount you'll have to pay up-front if you make a claim on your insurance, and it's made up of two parts: 'compulsory' and 'voluntary'. 

Some motorists may increase their voluntary excess to reduce the overall cost of their premium, but setting it too high could leave you in trouble if you need to make a claim.

Here, Which? weighs up the pros and cons of increasing your excess to save money on car insurance and offers advice to young drivers on how to sensibly save on the price of premiums.

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Confusion over car insurance excess

The compulsory excess on a policy is set by the insurer and can't be changed, but the voluntary excess is set by you. 

If you make a claim, your excess will be the combined amount of these two sums. So if your compulsory excess is £200 and your voluntary excess is £150, you'll need to pay £350.

However, a Go Compare survey of more than 2,000 drivers found that, on average, only 49% of respondents fully understood what voluntary and compulsory excess mean in relation to their insurance policies.

That figure dropped further when it came to young motorists – an age group that has seen the average price of premiums jump by 50% in the past year. It's therefore worrying that only 17% of drivers aged between 18 and 24 understood compulsory excess, and 23% understood voluntary excess. 

Those aged over 65 were the most knowledgeable, with 74% saying they knew what voluntary excess meant, and 73% saying the same about compulsory excess.

• Find out more: best car insurance companies

What's the risk of tweaking excess?

Adding a higher voluntary excess is a popular way to reduce your premium – something more and more drivers may be tempted to do while car insurance costs remain so high.

Setting the bar too high, however, might make claiming on your car insurance either pointless if the value of the claim is relatively small, or too expensive. Remember, the excess should be an amount you can afford to pay yourself if your car is damaged. 

Go Compare research found that, while just under a third of those surveyed fully expected to pay an excess, 12% said they were surprised by how much the excess was, and 10% claimed it was more than they thought they’d have to pay. A small proportion (7%) said it was either a nasty shock or that they couldn’t afford to pay it.

The comparison site also found that 40% of drivers would need to dip into their savings, and more than a quarter said they would use a credit card to pay the excess.

How do you choose the right excess?

Comparing your options and taking into account the different excess amounts is a good way to make sure you're getting a policy that you understand and provides the cover you need.

Figures such as £150, £250 and £500 are among the options available on price comparison websites. So play around with changing the excess and see how it affects the quote.

But remember, if you need to make a claim, the value of that claim must exceed the total excess. For example, if the voluntary excess and compulsory excess are both £250, the total excess will add up to £500. That means the value of repairs in a claim must exceed £500, otherwise you won't be able to make a claim.

Young drivers can find other ways to cut costs

Drivers under the age of 25 are among the hardest hit by recent car insurance rises. Average premiums for young motorists rocketed from £1,365 to £2,009 in the 12 months to January 2024, according to research by Compare the Market., bringing the total annual cost of running a car to more than £3,000. 

Choosing a higher excess to reduce the price of a premium could end up putting young motorists under even more financial strain in the event of making a claim. The good news is that there are other ways this age group can cut the cost of car insurance.

The first step should always be to shop around to see what other deals are available before you commit to renewing or buying a new policy. Use price comparison sites to help, but remember not all providers are on there. Which? Recommended Providers Direct Line and NFU Mutual are examples of this.

Also think about taking out what's called 'black box' cover, which uses technology to track your car and collect data on factors such as braking, steering, speed and mileage, to help the insurer decide how safe a driver you are. Your provider may then reward you for your driving skills with benefits such as retail vouchers and money off your premium.

Adding an older, more experienced driver to your policy can also sometimes reduce your annual premium. But be very careful if you choose this option. It's illegal to lie about who is the main driver and it can lead to an insurer refusing to pay a claim, cancelling the policy altogether or even taking legal action against you for fraud.

For more general tips on reducing the cost of a policy, take a look at our guide on how to get a cheaper car insurance deal.

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