The excess on comprehensive cover: when raising it pays

The excess is the part of every claim you carry yourself. It is not paid up front but deducted from the settlement: the insurer assesses the damage and transfers the difference, or the workshop invoices you for your share directly. If nothing is claimed, nothing is paid — the excess only costs you anything when something happens.

The words that matter are “per event”. The excess applies to each individual claim, not once a year. Two claims in twelve months cost it twice. So anyone working out whether to raise it has to reckon with the expected number of events, not with the chance that anything happens at all.

Partial and comprehensive cover carry separate excesses, and many policies run a third for glass or waive it there entirely. That separation is useful: partial-cover losses — theft, hail, hitting a deer — are not influenced by how you drive, whereas collision damage depends on your own mileage and surroundings. The two amounts can be set independently.

The discount is not a reward but a consequence: what you carry yourself, the insurer no longer has to price in. The reduction corresponds to the slice of expected claims cost that falls below the new threshold — plus the handling cost of every case that now never gets reported at all.

That second part explains why the discount is largest on the step from a very low excess to a middling one and flattens quickly afterwards. Small claims are frequent, and each one generates handling work that is almost independent of the amount involved. Taking those cases out of the system saves the insurer disproportionately.

Which gives a practical rule: the interesting question is not whether a high excess beats a low one, but where on the curve the discount stops growing meaningfully. You find that point by asking for three or four quotes on the same car with different amounts and laying the differences side by side.

Comparing two variants needs only three quantities: the annual premium difference, the difference between the two excesses, and the expected number of reported claims per year. The premium difference is a certain gain that arrives every year. The excess difference is a possible loss that arrives only when you claim.

Set the two equal and you get the only figure you need: the excess difference divided by the premium difference gives the number of years that must pass between claims for the change to pay. If your own experience is comfortably longer than that, the higher amount is right. If it is shorter, it is not.

You estimate your own figure not from a feeling but from the past: how many comprehensive claims have you reported in the last ten years? For most drivers the answer is none or one, and then the arithmetic is unambiguous. Anyone who parks in tight city streets, drives a lot, or has several drivers on the policy arrives at different numbers — and those are just as valid.

The calculation above systematically understates the benefit of a higher excess, because it leaves out one item: the loss of no-claims standing. A reported claim costs you not only the excess but several steps of your no-claims discount, and that setback feeds into every future premium for years.

So the real value of a high excess is not the discount but the threshold: it raises the point at which reporting a claim is worth doing at all. Small damage then gets paid out of pocket, not out of discipline but because that is how the sums come out — and the no-claims step stays where it is.

To price that in, add to the excess difference the sum of the extra premiums a setback causes across its recovery period. The table for it comes with every policy and is the least-read part of the contract. On small claims this item is regularly larger than the damage itself.

An excess is really an insurance policy against your own cash position. If you could not readily find the amount when it mattered, a low excess buys you not a return but peace of mind — and that is a legitimate reason. The premium difference is the price of it, and the price is known.

There are also cases where the choice is not free. Leases and some finance agreements require comprehensive cover and cap the excess, because the other party is protecting the value of the car and not your budget. That cap is in the finance contract, not in the policy, and it applies regardless of what the arithmetic would favour.

A third case often gets overlooked: the car somebody depends on. If you cannot get to work without it, a low excess buys not only money but speed — a repair authorised at once instead of a week spent wondering whether it is worth it. That advantage appears in no calculation and is real nonetheless.

The mirror case: if you could take the amount out of a reserve at any time, a low excess insures you against something that does not threaten you. That is the classic case of being over-insured in small things — paying every year so that someone else covers rare small amounts.

It is clearest on cars with few annual kilometres, a fixed parking place and a single experienced driver. There the expected number of claims is small, the discount still arrives every year, and the calculation from the previous section almost always comes out in favour of the higher amount.

A clean way to implement the decision: do not spend the annual premium difference, set it aside. After a few years the higher excess is sitting there as a reserve, and from then on the discount is genuine surplus. It is the same mechanism an insurer uses, applied to a single policy.

As a car ages the question shifts from the excess to the cover itself. Own-damage cover pays at most the replacement value, and that falls every year. At some point that value sits so close to the excess that comprehensive cover barely delivers anything in a write-off that you could not carry yourself.

Then there is the economic write-off: where repair costs exceed the replacement value, the car is not repaired but settled. On an older car that threshold arrives quickly — front-end damage alone can cross it through the sensors built in there. Knowing that, you do not weigh comprehensive cover against repair costs but against the value of the car.

The transition is rarely a clear date. In practice you check it once a year with two figures: what comparable cars are currently fetching, and the sum of the comprehensive premium plus the excess. As those converge, partial cover with a moderate excess is usually the better fit — theft, hail and glass stay covered, and those are the losses you do not cause yourself.

With most companies the excess can be changed at the next renewal, sometimes mid-term. It alters neither your no-claims standing nor any other rating characteristic — which makes it the least risky change you can make to a policy.

Before making it, the points below are worth a look. They are the difference between a decision you take once and one you regret at the moment of a claim.