What is voluntary excess on home insurance?

When you shop around for home insurance you're probably going to notice an insurance term popping up again and again – the excess. But what is voluntary excess on home insurance?

Understanding home insurance excess

Excess the proportion of the claim amount that you'd need to pay yourself, out of your own pocket. This is the case for most types of insurance, including car insurance. For example, let's say you make a claim £5,000 to repair water damage in your property after a significant leak. If your home insurance excess is £100, then the insurance provider will give you £4,900 after the £100 is deducted. If your excess is £200, they'll give you £4,800 – if it's £50, they'll give you £4,950, and so on. Basically, you’re paying a share of the claim costs.

What is compulsory and voluntary excess on home insurance?

Let's take a look at what compulsory and voluntary excess mean in terms of home insurance. Compulsory is something you have to pay, and voluntary is something you don't have to pay. So, your compulsory home insurance excess is a mimum amount that’s required by your home insurance provider – you’ll have to be happy with it before you take out the policy. Voluntary excess on home insurance is a little different, because you choose the amount It’ll usually go up in increments of £50.  excess is only voluntary in terms of the pre-agreed amount – if you make a successful claim, you have to pay the total excess amount. You can't choose not to pay your voluntary excess.

Two types of excess, together

Typically, your voluntary excess doesn't replace your compulsory excess. You'll generally find you need to pay both forms of excess in order to receive the payout on your claim. Coming back to the example - if you made a water damage claim for £5,000, and it was approved, and your compulsory excess is £100, you’ll receive £4,900. However, if your voluntary excess is £50,in most cases, they both apply – you cover the £100 compulsory excess and the £50 voluntary excess, which comes to £150 in total. So you’d receive £4,850 following your claim. It's probably a good idea to check the terms and conditions of your own home insurance policy, so you know what you’re excess levels are and how much you’d need to pay..

Voluntary excess for home insurance – why?

The big question is, "Why?" Why would anyone choose to cover more excess than the minimum. The main factor is – cost. Opting for a big voluntary excess could save you money. This is because you’ll be covering more of any claim you end up making, while the insurance provider will be covering less. In exchange, the provider will probably offer you a lower premium to pay. Choosing a higher excess also tells the insurance provider that you're not planning to claim on your insurance for smaller costs, and instead will be using it for emergencies. Whether or not the reduced premiums is worth it for the additional excess comes down to your personal circumstances and situation.

A few final tips...

• Compulsory excess is set by the insurance provider, while voluntary excess is set by you.
• As a rule of thumb, the more excess you pay, the lower your insurance premiums become.
• Generally, you'll need to pay both the compulsory excess and your nominated voluntary excess – not either/or!

Urban Jungle is not a financial advisor and information in this article should not be taken as advice or recommendation.