What is a Policy Excess?

The majority of insurance policies do not pay out the full cost of any claim you make under the policy. They apply what is known as a policy excess. This is an amount of money that is deducted from the total amount you are claiming.

So, for instance, you may have a motor policy with a policy excess of £250, your claim is for a total amount of £1,000, in which case you would receive a settlement of £750 from the insurance company.

The same situation applies in respect of building insurance.

Some insurance policies have different excess amounts for different types of claim. Using a buildings policy as an example, you may find an excess of £1,000 if your property suffers from subsidence, or an excess of £500 if your home has suffered water damage as a result of a leaking pipe. Other types of claim, such as malicious damage may only have an excess of £100.

As well as the premium you pay for the insurance policy, excesses can also reflect the level of risk the insurance company is taking by insuring your property, whether it is the building or your belongings. If your property has a history of subsidence or flooding you could see a higher than standard excess for those types of claims.