In the world of home insurance comparison policies in Australia, there is a lot of jargon that we are required to understand when setting up our policies. For instance, you will most likely come across the term “excess”. Insurance excess refers to the amount of your own money that you need to pay in case of a claim. For example if you have a claim of $2000 and have a $500 excess, you will have to pay $500 of your own money, and the insurance company will pay the remaining $1500. When you take out an insurance policy, if you have a higher excess, this will usually mean that you pay a cheaper premium.
There are two main types of excess that insurance policies have - a standard excess or a voluntary excess.
The excess value is a decision that you make prior to purchasing insurance, and it will also depend on the type of insurance policy you are buying. You can usually choose from several types of excess but in general, you can lower your premium if you agree to have a larger value excess as part of your policy. This is because some of the insurance company’s risk is transferred back to yourself.
There are two main types of excess that insurance policies have – a standard excess or a voluntary excess. A standard excess is usually applicable to every claim, while a voluntary excess is something that you choose in order to reduce your premium. There are also some instances when multiple excesses apply, depending on the type of claim.
Here are other things to consider when it comes to excess in your insurance policy:
- Compare cover levels and excess for the insurance policy you are purchasing. You can use a calculator to check how different excess amounts can affect your monthly premiums.
- Read the Product Disclosure Statement (PDS) This goes without saying but sometimes, people skip reading this usually text-heavy document, but this is important. It outlines the specifics for the product including cover, claims and other important information.
- Paying your excess can either be through deduction from the amount that the insurer will pay you in case of a claim, or you will be advised to pay it through the assigned supplier. Also, you may be asked to pay the total excess amount before you can receive your claim.
Do you have other tips on excess and how to compare insurance in Australia? Share your ideas in the comments section below.