Many of us confidently pay our insurance premiums each month, assuming we are fully covered in the event of a claim. But when that time comes, it can be discouraging if you can only get a small pay-out, or if you suddenly have to pay a large excess to get the claim completed.
"It is even more discouraging if this is because you have misunderstood your own policy, and weren’t really aware of the built-in excesses," says Bertus Visser, Chief Executive of Distribution at PSG Insure.
An excess is, of course, the first amount of any claim that you are expected to pay.
"What will typically happen is if the excess on your policy is R1000, for example, and your claim is R5000, your insurer will only pay out R4000 and you will need to cover the other R1000 out of your own pocket," Visser explains. "Some clients forget or aren’t really aware of their excess amounts, and therefore at claim stage it is frustrating and ends up costing them more than they thought it would."
Be aware of any excesses that apply, and the options available to you
There are usually options when it comes to excesses, such as paying a higher premium on your car insurance to avoid having to pay any excess should you need to claim, or varying excess amounts for reduced monthly premiums.
"Generally, the higher the excess you are prepared to pay, the lower your premium, but the different options available will really depend on your provider and the type of insurance you’re buying," he says.
For example, certain insurance policies such as contents insurance don’t allow for zero excesses. In other cases, depending on your age or circumstances, additional excesses may also apply. Younger drivers, for example, are seen as a higher risk.
"In some cases there can easily be three to five layers of excess that may be unaffordable to pay, which means that a claim won’t be settled – and ultimately makes it impossible to repair the car," Visser says.
On the flip side, there are also incidents where your insurer might waive your excess at claim stage, such as if a car accident was not your fault.
Consider your unique needs
"There are many different conditions and clauses, and these are all adjustable as your needs change," says Visser. For example, you may have some savings that could cover a high excess should you need to pay it, and that could then allow you to reduce your premiums. On the other hand, you may want to have as low an excess as possible and rather have your premiums be higher.
You can also look into taking out top-up cover on your policy, which could cover your excess. Top-up cover is designed to pay for costs that your insurer won’t cover.
"Depending on your cover and the nature of your claim, this ensures that you are not out-of-pocket when your insurance pay-out does not cover your full loss, or when your claim is less than the excess you have to pay in," Visser says.
It’s always best to be prepared
Keep your policy in check, look at it periodically and make sure you are prepared for your part should you need to claim.
"Your excess might not be a figure you ever really think about, but it’s best to be prepared so that you have a certain amount of money set aside for your excess payment, or can put top-up cover in place in case you need to claim. If you are unsure of what is best for you, it’s always a good idea to speak to your financial adviser," Visser concludes.