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Why Do We Pay A Car Insurance Excess?

Mar 8, 2023 | Car, Car Insurance

There are a few things that are standard about car insurance in South Africa. For example, all policies have a ‘duty of care’ condition – which means that you, as the policyholder, need to take reasonable steps to ensure that your car is safe and looked after. Like locking your vehicle before walking away, avoiding parking in dangerous neighbourhoods, and making sure to have it serviced at regular intervals.

Another standard rule is that all car insurance policies include an insurance excess cost that you need to pay when you claim.

Wondering why you must pay this amount of money when you’re already paying a monthly premium so that you can claim for losses? We can help you there!

First, though, let’s define what a car insurance excess is and then we can unpack why it’s charged at all.

What Is A Car Insurance Excess?

There are a few different types of excesses, but the one that we’re talking about here is the standard excess that is included with all car insurance policies. It is sometimes referred to as a ‘basic excess.’

This excess is defined as the uninsured portion of your loss, which is payable by you when you put in a claim for any form of loss involving your insured vehicle. Essentially, an excess is the amount of money that you’ll pay to your insurer when you lodge a claim.

Importantly, you’ll need to pay your excess even if the reason why you’re claiming isn’t your fault, which is something that a lot of young people or people who are unfamiliar with car insurance aren’t aware of.

It can come as a shock to find out that you need to pay in a few thousand when you claim, which is why it’s always a good idea to familiarise yourself with the terms and conditions of any insurance contract before you sign it.

Why You Have To Pay The Excess

There’s no big mystery around why an excess is part of the insurance deal and yet it’s still a largely misunderstood cost. Perhaps the most common myth that we’ve found is that a lot people think that if they agree to pay their excess, they are admitting guilt in some shape or form.

Before we explain, it’s worth noting that insurance is made up of the contributions (AKA premiums) by many into one pool of funds, which is then used to pay the claims of a few.

Problematically, what started happening was that some people would claim often, and mostly for very small incidents, thus depleting the pool and causing the cost of insurance to increase for everyone as insurance companies sought to cope.

The solution was to find a way to prevent multiple small claims and encourage people to use their insurance policies to cover the financial loss that comes about as a result of a significant event.

And that’s why the excess was introduced, to help:

  • Deter multiple claims on small incidents
  • Reduce the administrative costs involved when processing claims
  • Keep the cost of insurance affordable
  • Make people co-responsible for looking after their insured belongings

Feel informed?

This information is intended to help you understand what a car insurance excess is and why it exists at all. Don’t forget to check out our other articles which explain how your excess is calculated and how you can choose your own excess amount!

AA Inform is also home to a range of useful tools that could benefit your life, such as our fuel consumption calculator which you can use for specific trips. We can even point you in the direction of the AA Insurance Supermarket, which you can use to shop around and compare up to 7 car insurance quotes from reputable insurance providers.

This way, you can make sure that you’re securing the best premium and excess amount for your budget.

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