Guide
What is an insurance excess?
An excess is the amount you pay towards a claim before the insurer pays the rest. Choosing it well is one of the few levers you control on price. Here is how an excess works on business policies, when more than one applies, and how to pick a figure that lowers the premium without hurting you at claim time.
- How an excess is applied to a claim
- Why a higher excess lowers the premium
- When two excesses apply at once
What an excess is
The excess is your share of each claim. If a claim costs $5,000 and your excess is $500, the insurer pays $4,500. Moneysmart describes it as how much you need to pay up front before you get any money from your insurance, and notes that if you settle a claim for cash, the excess is taken from the amount paid to you. The figure is on your policy schedule, and most insurers let you move it up or down when you buy or renew.
On business policies the excess usually applies per claim, per section. A business pack can carry different excesses for property, glass, theft and liability, and a liability policy can carry a higher excess for particular work.
The excesses you’ll see on business policies
| Excess | Where it appears | What it means |
|---|---|---|
| Standard excess | Every policy | The basic amount you pay on each claim |
| Section excess | Business packs | A different figure for each section, such as theft or glass |
| Imposed excess | Liability and trades policies | A higher excess the insurer sets for a risk it rates higher, such as work at heights or hot work |
| Claims-history excess | After a claim | An extra amount applied at renewal when you’ve claimed before |
| Combined excesses | Some events | Moneysmart notes there can be more than one excess that you need to pay in some situations |
Read the schedule, not just the PDS. The schedule lists the excesses that apply to you.
How to choose your excess
Moneysmart’s advice is to weigh up the difference between a high premium with a low excess and the opposite, and to choose a higher excess only if you can pay it when you claim. For a business, that means an excess you can cover from cash flow on a bad week, not a figure that would stop you lodging a claim.
The excess also decides whether to claim at all. If a repair costs less than the excess, you pay it yourself and keep your claims history clean. Moneysmart uses the example of a $400 repair against a $650 excess. Revisit the figure at renewal: a quote at two excess levels shows what the difference is worth.
Compare quotes at the excess that suits you
Insurance excess questions
Do I pay the excess if the claim wasn’t my fault?
On liability policies the insurer handles the claim against you, and the excess usually applies once the claim is accepted. On motor policies, Moneysmart suggests checking whether the insurer always charges an excess, even if an accident isn’t your fault.
Does a higher excess always mean a cheaper premium?
Most insurers allow you to adjust your excess, and the higher the excess the lower the premium. The saving differs between insurers, so compare quotes at two excess levels.
Can I claim if the damage costs less than the excess?
You can, but you would receive nothing, and the claim goes on your history. Most businesses pay small repairs themselves.
What is a nil excess?
A policy where you pay nothing towards a claim. It costs more, and it’s rare on business liability cover.
Can the insurer defer my excess?
If you’re in financial hardship, Moneysmart says to speak to your insurer, which may give you an advance on the claim or defer the excess.
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