What is Compulsory and Volunteer Excess in Car Insurance

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*Above mentioned prices are for Honda City EX 1.5L, 2017 model.
*Above mentioned prices are for Honda City EX 1.5L, 2017 model.

Most insurance companies offer insurance plans with compulsory excesses. Therefore, to make an informed decision and get the best car insurance plan, all car owners must understand what Excess in car insurance is.

What is Excess in Car Insurance?

The Excess in car insurance is an amount that you need to pay when reporting a claim. For example, the cost of your damages is AED 2000, and you have agreed to pay the Excess of AED 200 at the time of buying the insurance policy. Therefore, you will pay the first AED 200, and your insurance company will pay the rest of the amount.

Excess is also called a deductible in car insurance. It is not an add-on but a technical concept that insurance companies consider at the time of setting claims. It is a pre-determined value of the claim to be paid by the policyholder.

Types of Excesses in Car Insurance

There are two types of excesses in car insurance policies.

    • Compulsory Deductible
    • Voluntary Deductible 

    1. Compulsory Deductible

    A Compulsory Deductible is a part of your claim that you need to pay out of your pocket. All the car insurance companies in Dubai mandate the Compulsory Deductible and add this clause to their car insurance policies to encourage good driving behaviour.

    Here are a few things you need to know about Compulsory Excess in car insurance.

    • It is also called mandatory Deductible in an insurance plan
    • It gets calculated depending upon the vehicle’s engine capacity
    • The policyholders cannot modify it

    2. Voluntary Deductible

    Voluntary Deductible is called the Voluntary Excess in car insurance. It is the part of your claim that you agree to pay by yourself.

    The Voluntary Deductible varies depending upon the factors considered by the insurance company. You may also get a provision in your insurance policy to adjust the Voluntary Excess based on your financial conditions.

    Here are the primary reasons why you must opt for Voluntary Excess.

    • It reduces the amount of your insurance premium
    • You get discounts on the policies you buy with Voluntary Excess
    • Keep in mind your budget and choose the suitable Excess amount in car insurance
    • Choose when you are confident about your financial conditions

    The Voluntary Excess is higher for the young-aged drivers as they fall into the high-risk category.

    Voluntary Excess in car insurance works differently from Compulsory Excess. It allows the policyholders to choose the Excess amount in the car insurance policy as per their choices. Excess is worth looking at while buying the insurance plan as it affects the premium amount. However, you need to pay both Compulsory and Voluntary Excess amounts in the car insurance policy at claim settlement.

    How Excess Amount Affects the Insurance Premium

    The Excess amount in the car insurance policy is a contribution you make at the time of claim settlement. By adding Excess to your car insurance policy, you enjoy paying a lower premium amount. However, if you opt for a lower Excess amount, you need to pay a higher premium amount and vice versa.

    You can also refuse to pay Excess in car insurance, but in that case, you will end up paying the higher insurance price. Most insurance companies in the UAE give you the choice of paying the Excess or higher insurance premium. It is your choice to make.

    The Bottom Line

    Including the clause of paying Excess amounts in car insurance is a smart move. It also encourages you to save money to be ready to pay the Excess amount in case you need to report a claim.

    There are various other excesses in car insurance that can be applied individually or in combination, depending upon who is driving the car and the additional options you choose in your insurance policy. These excesses include Age Excess, Standard Excess, Windscreen Excess, Inexperienced Driver Excess, and many others.

    Make sure you go through all the types of excesses available in your insurance policy and make a wise choice.

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