Understanding insurance excess

Most people are likely to be involved in a car accident at some point in their lives, particularly in South Africa, which has a very high accident rate. However, many consumers mistakenly believe that if they are involved in a no-fault accident then they will not be required to pay the excess on their insurance policy.

This is according to Delouise Marais, Regional Manager of MUA Insurance Acceptances Gauteng.

“Many consumers believe that if they are in an accident the guilty party will be required to pay the excess on both vehicles.

"However this is not the case as policyholders themselves are always, first and foremost, responsible for the excess payable in terms of their own policies.”

She says that once the insurer has recovered the money from the other party; however, they should reimburse the excess.

“It is important for anyone who is involved in a no-fault accident to track the status of the claim and make sure that their insurer refunds their excess and reinstates their bonus or no claims discount once the money has been successfully recovered from the other party’s insurance policy.

“This is one of the reasons why it is so important to establish compulsory third party insurance in South Africa. At the moment it is estimated that only 35% of the cars on the road are insured. If you are involved in an accident with one of these cars then not only will you have to pay the excess but it is also highly unlikely that you will recover the cost of the damages, which means you may lose your no claims discount.”

Marais also notes that there is more than one excess that can be levied on an insurance claim. “Most insurance companies charge a higher or additional excess if the driver is younger than a certain age, as a result of the high frequency of accidents in this age bracket or if the insured has a bad claims history.

She says that while these are common excesses that many people understand, there are additional excesses payable that few people are aware of. “Most policies may include a theft excess, which means that the consumer is responsible for paying an additional excess when their car is stolen or high-jacked.”

“Another important point for consumers to be aware of is the introduction of the time of accident excess. Nowadays, some insurers also charge a higher excess if an accident takes place at a certain time – say at night between 12 and 5 in the morning.”

Marais says one can elect to have a waiver on a policy whereby the basic excess is deleted, however this is likely to result in an increase in the premium paid. “It is also important to realise that this excess waiver is often only applicable to the basis excess and one might still find themselves responsible for any additional excess noted on the policy.”

“There are a number of different excesses that can be levied on an insurance policy and it is very important for consumers to read their policies carefully and take the time to speak to their brokers to establish exactly what excesses they may be liable for,” concludes Marais.