Insurance Excess Explained: Compulsory vs Voluntary, and How Much to Choose

By Alice T · PolicyChecker editorial team

Excess is the part of an insurance policy almost everyone agrees to without really thinking about — and then deeply regrets at claim time. It's the slice of any claim you pay yourself before the insurer pays the rest. Get it right and you'll lower your premium without much downside. Get it wrong and you'll either overpay every year or, worse, discover that a claim you were counting on is barely worth making. This is the plain-English guide to how excess actually works, and how to choose a sensible amount.

What "excess" really means

If your policy has a £250 excess and you make a £1,000 claim, the insurer pays £750 and you cover the first £250. Simple enough — but the word hides a few traps, because most UK policies don't have one excess. They have several, and they stack.

Compulsory vs voluntary excess

There are two main types, and you need to know both:

• Compulsory excess — set by the insurer, non-negotiable. It reflects how risky they consider you or the claim type. Younger or newer drivers, for instance, often carry a higher compulsory excess on motor cover.
• Voluntary excess — the amount you choose to add on top, in exchange for a lower premium. Offer to pay more of any claim yourself, and the insurer rewards you with a cheaper price.

Your total excess on any claim is the two added together. A £150 compulsory plus a £200 voluntary excess means you pay the first £350 of any claim. This is the number that matters, and it's the one people forget.

The hidden extra excesses

On top of those, many policies bolt on specific excesses for particular risks — and these are where the nasty surprises live:

• Home insurance: escape of water (a burst pipe or leak) and subsidence frequently carry their own much higher excesses — sometimes £350, £500 or more for water, and often £1,000 for subsidence, on top of the standard excess.
• Motor insurance: windscreen claims usually have a separate (lower) excess; young or named-driver excesses can be added for specific drivers.

So a policy advertised with a reassuring "£100 excess" might actually mean £600 if the thing that goes wrong is a leak. Always read the schedule for the per-peril excesses, not just the headline number.

How choosing a higher voluntary excess works

Raising your voluntary excess lowers your premium because you're taking on more of the risk. It can be a smart trade — but only within limits. The logic:

• A higher excess = lower yearly premium, but more out of pocket when you claim.
• A lower excess = higher yearly premium, but less pain at claim time.

The sweet spot is an excess you could comfortably pay tomorrow without stress, set as high as that comfort allows. Push it higher than you can actually afford and you've created a policy that technically exists but that you can't realistically use.

How to choose the right excess — a simple method

1. Find your total compulsory excess first. That's your floor; you can't go below it.
2. Decide what you could pay without flinching. £250? £500? Be honest about your savings.
3. Set your voluntary excess so the total lands at that comfortable number. Not higher.
4. Check the per-peril excesses (water, subsidence, etc.). If they're sky-high, factor that into whether the policy is right for you at all.
5. Run the numbers. Ask the insurer what raising your voluntary excess by £100 or £200 saves per year. If raising it £200 only saves £15 a year, the trade isn't worth it. If it saves £80, it might be.

The "is it even worth claiming?" test

Here's the trap excess sets. Suppose you have a £400 total excess and £700 of accidental damage. You can claim — but you'll only receive £300, and you'll likely lose your no-claims discount and see next year's premium rise. For small claims close to your excess, claiming can cost you more than paying for the repair yourself. Always do this quick sum before you claim:

Payout after excess − likely premium increase − value of lost no-claims discount = what claiming is actually worth.

If that number is small or negative, pay for it yourself and keep your record clean.

Excess and your no-claims discount

Excess and no-claims discount are separate things that interact. Even a valid, paid-out claim usually dents your no-claims discount and raises future premiums. That's why a high excess plus a habit of claiming for small amounts is the worst of both worlds — you pay the excess and lose the discount. A sensible excess paired with self-funding the truly small stuff keeps your insurance cheap over the long run.

Don't let excess be the thing you discover at claim time

The excess structure is one of the most important — and most overlooked — parts of any policy. Two policies at the same price can have wildly different excess setups, and the cheaper-feeling one can cost you far more the day something goes wrong. Before you buy, read the schedule for:

• The compulsory excess,
• Any voluntary excess you've set,
• And every per-peril excess (especially water and subsidence on home cover).

That's exactly the kind of small print PolicyChecker reads for you — surfacing the real, total excess on each peril in plain English, so you choose a policy with your eyes open instead of finding out the hard way. A few minutes before you buy saves you the worst surprise in insurance: a claim that, after excess, was never worth making.

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This guide is general information, not financial advice. For free, impartial help, see Citizens Advice or the Financial Ombudsman Service. PolicyChecker helps UK consumers understand an insurance policy before they buy — check a policy.