Car Insurance Excess Explained (2025): How Your Excess Choice Affects Premiums
Australia 2025 · Compare costs · Real-world examples · Pros and cons · Eligibility · How to choose
TL;DR Summary
- Car insurance excess is the amount you pay if you make a claim.
- A higher voluntary excess usually lowers your premium; a lower excess raises it.
- There’s a standard/compulsory excess set by the insurer + an optional voluntary excess you choose.
- Extra excesses may apply (e.g., age/inexperienced driver, unlisted driver, special parts).
- Excess typically applies when you’re at fault or the other party can’t be identified (e.g., unknown hit-and-run).
Concept Overview — why this matters in Australia
Choosing the right excess helps you balance up-front premium cost and out-of-pocket cost if you claim. In Australia, most comprehensive policies let you adjust the voluntary excess in $100–$1,000+ steps. The higher you set it, the more you’re agreeing to pay if you have a claim, so the insurer usually charges a lower premium.
Good for budgeting: drivers who rarely claim may pick a higher excess to reduce annual cost. New drivers or those needing predictable expenses might prefer a lower excess.
Comparison Table
| Feature | Standard (Compulsory) Excess | Voluntary Excess |
|---|---|---|
| Who sets it | Insurer | You choose (within insurer limits) |
| Impact on premium | Built into base premium | Higher voluntary excess → lower premium; lower excess → higher premium |
| When payable | When a payable excess applies to a claim | In addition to standard excess when it applies |
| Typical range | ~$500–$850 (varies by insurer/driver/vehicle) | $0–$2,000+ (steps such as $250, $500, $1,000, $1,500) |
| Strengths | Simple, automatic | Lets you tailor premium vs claim cost |
| Limitations | Not adjustable by you | You must afford the excess at claim time |
| Best for | Everyone (it’s compulsory) | Drivers who want lower premiums and can cover higher out-of-pocket costs |
Other common excess types in Australia
| Excess type | When it can apply | Notes |
|---|---|---|
| Age / Inexperienced driver excess | Driver under 25, or licensed < 2 years | Often on top of standard + voluntary excess |
| Unlisted driver excess | Driver not listed on policy | Can be significant; always list regular drivers |
| Windscreen/single glass excess | For glass-only claims | Some policies offer reduced or nil glass excess add-on |
| Theft or hail/storm excess | Specified events | Sometimes different from standard excess |
| Special parts/modifications excess | Performance mods, non-standard parts | Applies if mods aren’t declared/approved |
Who Each Option is Best For (Decision Guide)
Lower Excess ($0–$500)
- New drivers or higher claim risk
- Tight cash flow (can’t absorb a large one-off cost)
- High-value vehicles where repairs are expensive
Trade-off: Higher premium each year.
Moderate Excess ($650–$1,000)
- Balanced option for most drivers
- Some premium savings without extreme out-of-pocket
- Suitable if you claim rarely
Higher Excess ($1,250–$2,000+)
- Experienced drivers with clean record
- Confident they can self-fund minor repairs
- Seeking the lowest annual premium
Risk: You must have cash ready if a claim occurs.
Real-world Premium Impact — worked examples (illustrative only)
These are example numbers to show how the trade-off can look. Actual pricing varies by insurer, state, driver history, vehicle, parking, kms, and optional covers.
| Scenario (Comprehensive) | Excess | Annual Premium | If you make one at-fault claim | Total outlay that year (premium + excess) |
|---|---|---|---|---|
| Balanced option | $750 | $1,150 | Pay $750 excess | $1,900 |
| Lower excess, higher premium | $500 | $1,280 | Pay $500 excess | $1,780 |
| Higher excess, lower premium | $1,500 | $980 | Pay $1,500 excess | $2,480 |
Takeaway: A higher excess can save on premiums if you don’t claim, but costs more in a claim year. Choose a level you can comfortably pay at short notice.
Step-by-Step: How to Choose Your Excess
- Check your policy PDS (Product Disclosure Statement) for all applicable excesses, not just the standard amount.
- Get quotes at 3–4 excess levels (e.g., $500 / $750 / $1,000 / $1,500) and compare total annual cost.
- Stress-test your budget: Could you pay that excess tomorrow? If not, pick a lower excess.
- Consider driver mix: Regular drivers under 25 or new licence holders? Factor in age/inexperienced excess.
- Add-ons: If you add windscreen cover with reduced excess, check the premium impact.
- List all regular drivers to avoid an unlisted-driver excess.
- Review yearly as your risk and car value change.
FAQ
What is car insurance excess in Australia?
It’s the amount you agree to pay towards a covered claim. Your insurer pays the rest, up to the policy limits, terms and exclusions.
Does a higher excess always reduce my premium?
Usually yes, but not always by the same amount. The saving depends on your risk profile, vehicle and the insurer’s pricing model.
Do I pay excess if I’m not at fault?
Often no if the insurer can recover costs from the identified at-fault party. If the other driver can’t be identified, an excess may still apply (check your PDS).
What if an unlisted driver crashes my car?
An additional unlisted driver excess may apply, which can be substantial. Always list regular drivers on your policy.
Is windscreen excess different in Australia?
Some policies offer a separate, lower glass excess (or nil excess) as an optional add-on. It usually increases the premium slightly.
How much excess should I choose in 2025 Australia?
Pick the highest excess you can comfortably pay at short notice, after comparing premiums at different levels. Balance savings vs risk of a claim.
Does CTP (green slip) have an excess?
CTP covers injury liability, not your car’s damage. Excess rules differ from comprehensive/third-party policies—check your state scheme and PDS.
Will a claim always increase my next premium?
Not always, but it can. Insurers reassess risk each renewal. Ask your insurer how a claim may affect future pricing.
Sources / Official References
- ASIC MoneySmart — Car insurance
- ACCC — Insurance consumer guidance
- ATO — Vehicle & travel expenses (work use)
- (Context) PrivateHealth.gov.au — MLS overview
- InfoChoice — Car insurance excess explainer
- Your insurer’s PDS and Target Market Determination (TMD)
Non-financial advice disclaimer
This article is for general information only and is not financial advice. Please check official government resources or a licensed financial adviser before making decisions.