What is the 'excess' in an insurance policy?

The term 'excess' in an insurance policy refers specifically to the amount that the policyholder is required to pay out of pocket before the insurance company will cover the remaining costs associated with a claim. This concept is fundamental in many insurance products, as it often helps to manage the risk that insurers take on while also potentially reducing the overall premium cost for the policyholder.

When a claim is made, the excess amount is deducted from the total claim payment. For example, if a policy has a £500 excess and a claim is submitted for £2,000, the insurer would pay £1,500. This structure encourages policyholders to be more responsible in managing risks, as they have a financial stake in the claim process.

Understanding the role of excess in an insurance policy is crucial for policyholders, as it affects both their financial planning when a claim arises and the overall cost of their insurance coverage.