An insurance excess is the amount the policyholder contributes when making a claim. Whether an excess applies, its amount, and the circumstances in which it may be waived depend on the policy.
That one sentence answers most of the question, but it hides the part that catches people out: the excess is not a single number. A policy can carry more than one excess, they can stack, and the total you contribute on a particular claim can be quite different from the figure you remember from the quote. This guide explains how an excess works, when you are likely to pay it, when a policy may waive it, and how it interacts with your premium — so you can read your own policy and know what a claim would actually cost you.
What “excess” means
When you make a claim, the insurer pays for the covered loss less your excess. If a repair is assessed at a certain amount and your excess is a smaller amount, the insurer covers the difference and you contribute the excess — usually by paying it to the repairer or the insurer, or by having it deducted from a cash settlement. If the repair cost is lower than the excess, there is nothing for the insurer to pay.
The excess exists partly to share the cost of small claims and partly to discourage claims that are cheaper to fix privately. It is set when the policy starts and is written into your policy schedule or certificate of insurance. The Product Disclosure Statement (PDS) explains how it applies; many insurers also publish a separate premium, excess and discounts guide that sets out the excess options in more detail.
When you may have to pay an excess
The general position, as Moneysmart puts it, is that you have to pay an excess when you make a claim whether you are at fault or not. That surprises people who assume a not-at-fault accident is excess-free. Whether it is depends on the policy and on the circumstances — typically on whether the other party can be identified and is at fault.
Situations where an excess commonly applies include:
- an at-fault accident, or one where fault is shared;
- a not-at-fault accident where the other driver cannot be identified (for example a hit-and-run or a stolen vehicle that is not recovered), depending on the policy;
- damage with no other party — a car park scrape, storm or hail damage, a collision with an animal;
- theft of the vehicle or theft of items from it, where covered;
- windscreen and glass claims, unless the policy carries a specific glass option that reduces or removes the excess for that type of claim.
Some policies apply a different excess amount to different claim types. Check the schedule rather than assuming the one figure you were quoted applies to everything.
When a policy may waive the excess
Some policies waive the excess in limited circumstances. The most common is a not-at-fault claim where the at-fault party is identified and their details are provided to the insurer — but the exact test is written into each policy, and it is not universal. A policy may require that the other driver be identified and found to be at fault, or that the insurer be able to recover the cost from them, before the excess is waived.
Moneysmart’s own example makes the point: a driver whose car is hit by someone in a stolen car who then drives off is told she still has to pay her excess, because her policy requires the excess where the at-fault party cannot be found. Read the waiver condition in your own policy; do not assume “not my fault” equals “no excess”.
Compulsory and additional excesses
Many comprehensive policies are built around a basic (or standard) excess — the amount that applies to most claims — with additional excesses that may be added on top in particular circumstances. Where they apply, they usually stack, so the total contribution on one claim is the basic excess plus each additional excess that is triggered.
The additional excesses below are examples of the kinds of conditions some policies may apply. They are not a standard set that every Australian policy uses, and the names, triggers and amounts vary between insurers and products:
- Age excess: some policies may apply an additional excess when the driver at the time of the incident is under a certain age, commonly a threshold in the mid-twenties.
- Inexperienced-driver excess: some policies may apply an additional excess where the driver has held a licence for less than a stated period, regardless of age.
- Unlisted-driver excess: some policies may apply an additional excess where the driver was not listed on the policy, and some policies exclude cover for unlisted drivers altogether. This is the one that most often matters when a friend or family member borrows the car.
- Theft-related or special-vehicle excess: some policies may apply a specific excess to theft claims, or to particular vehicle types, modifications or uses.
- Voluntary excess: an amount you choose to add to the basic excess in return for a lower premium (see below).
The practical step is the same for every one of these: open the policy schedule and the PDS, find the excess section, and write down which excesses could apply to the people who actually drive your car.
How excess and premium trade off
The excess and the premium generally move in opposite directions. Choosing a higher excess reduces the premium; choosing a lower excess increases it. Moneysmart lists increasing your excess as one of the ways to reduce a premium, with the caveat that you need to be able to pay the excess if you make a claim.
That caveat is the whole decision. A higher excess only saves you money if you either never claim or can comfortably fund the excess when you do. A useful way to think about it:
- How much would I have to find, at short notice, if the car was damaged next month? Could I pay that without hardship?
- How much does the higher excess actually save per year, compared with the amount of extra excess I would pay on one claim?
- If the annual saving is small relative to the extra excess, the higher excess is a bet that I will not claim for several years.
When you compare quotes, compare them at the same excess. Two premiums are not comparable if one is quoted at a higher excess than the other. Moneysmart also suggests asking your insurer directly whether there is a cheaper option with a different excess — it is a normal question, and the answer tells you what the trade-off is worth on your policy.
A worked example
Hypothetical example only — not a typical excess or premium. The figures are invented to show the arithmetic and do not represent any insurer, policy or market average.
Suppose a policy carries a basic excess of $700 and an additional unlisted-driver excess of $500. The car is driven by a friend who is not listed on the policy and is involved in an at-fault collision. Repairs are assessed at $4,200.
- Excess payable: $700 basic + $500 unlisted-driver = $1,200.
- Insurer’s contribution: $4,200 − $1,200 = $3,000.
Now suppose the same car, with the policyholder driving, suffers $650 of damage in a car park with no other party identified. The basic excess of $700 exceeds the repair cost. There is nothing for the insurer to pay, and lodging a claim would gain nothing while potentially affecting future premiums or a no-claim discount.
Same policy, two very different outcomes — which is why the excess section of the schedule is worth reading before the accident rather than after it.
Is a small claim worth making?
Not always, even when the damage is covered. Moneysmart’s guidance is that you might decide not to claim if the damage is minor and paying for the repair yourself is cheaper than paying the excess, or if the damage is minor and claiming would push up your future premiums. Some policies also reduce or remove a no-claim discount after a claim.
A simple test: if the repair quote is close to or below your total excess for that claim, claiming usually makes no financial sense. If the repair is well above the excess, the claim is doing what you pay the premium for. In between, weigh the excess against the likely effect on next year’s premium — and remember that some policies require you to notify the insurer of an incident even if you do not intend to claim, so check that obligation before deciding to handle it privately.
How to check your own excess
- Find the policy schedule or certificate of insurance. This lists the excess amounts that apply to your policy specifically, including any voluntary excess you selected.
- Read the excess section of the PDS. This explains when each excess applies, how they combine, and the conditions for a waiver.
- Look for a premium, excess and discounts guide. Many insurers publish one alongside the PDS; it often sets out the excess options and how they affect the premium.
- List who drives the car. Check whether each regular driver is listed and whether an age, inexperience or unlisted-driver excess could apply to them.
- Ask before you claim. If you are unsure what excess would apply to a particular incident, ask the insurer before lodging — you can usually describe the situation and get the answer without committing to a claim.
Excess sits alongside the other policy settings that shape what a claim pays out — whether the car is insured for an agreed value or market value, and whether the cover is comprehensive or third party. The factors that drive the premium itself are covered in what affects car insurance premiums. For younger drivers, the way age and inexperience excesses interact with premiums is discussed on our under-25s and young drivers page.
Car insurance excess FAQs
What is an excess in car insurance?
An excess is the amount you contribute when you make a claim. The insurer pays the covered loss less your excess. Whether an excess applies, how much it is, and when it may be waived depend on the policy, and a policy can carry more than one excess.
Do I pay an excess if the accident was not my fault?
Often yes. Generally an excess applies whether or not you are at fault. Some policies waive it in limited circumstances, commonly where the at-fault driver is identified and their details are provided, but the exact condition is set by each policy and is not universal.
Can more than one excess apply to a single claim?
Yes. Many policies combine a basic excess with additional excesses that some policies may apply in particular circumstances, such as a young or inexperienced driver or a driver not listed on the policy. Where they apply, they generally stack.
Does a higher excess make insurance cheaper?
Generally, choosing a higher excess reduces the premium and choosing a lower one increases it. The saving only works in your favour if you can comfortably pay the higher excess when a claim happens, so weigh the annual saving against the extra amount you would contribute on one claim.
Should I claim if the damage is minor?
Not necessarily. If the repair costs less than or close to the excess, claiming gains little and may affect future premiums or a no-claim discount. Check whether your policy requires you to notify the insurer of an incident even if you do not intend to claim.
Where do I find my excess?
On your policy schedule or certificate of insurance, with the conditions explained in the Product Disclosure Statement. Many insurers also publish a premium, excess and discounts guide. If in doubt, ask the insurer which excesses would apply before you lodge a claim.
Can I change my excess after the policy starts?
Some insurers allow you to change a voluntary or selected excess at renewal or mid-term, which usually changes the premium. Whether and when you can do this depends on the insurer and the policy.
Written and reviewed by the team at Car Buyers Assist
This article is general information only and does not take into account your objectives, financial situation or needs. It is not advice about any particular insurance product. Car Buyers Assist helps customers find cover through its partners and does not assess every product available in the market. Excess amounts, the circumstances in which an excess applies or is waived, cover, exclusions, limits and conditions vary between insurers and between policies — always read the relevant Product Disclosure Statement and Target Market Determination, and confirm your own position with your insurer before relying on cover. Figures in the worked example are hypothetical and do not represent any insurer, policy or market average.