Insurance insights

What is an insurance excess?

Excess – it’s an insurancey term that can cause a bit of confusion among policyholders. However, when explained simply, we promise that it makes a whole lot of sense! That is why we are jumping on our online Info Centre to answer all your questions about this topic.

So, you have just found the perfect insurance policy. Then, you start reading the policy documentation and see that excesses are applied to certain features. Do you ignore this section and hope that it doesn’t have an impact on cover? No! Because the truth is, it will have an impact on your premium and claims. Here’s how…

But first, what even is an excess?

An excess (or deductible) is the dollar amount of any loss or damage that you must contribute towards each claim. For example, in a RentCover Ultra policy, we have a $500 excess for storm damage. This means, if you submit a successful claim for storm damage, we will pay out the losses, minus your $500 excess/contribution.

Why do insurers have excesses?

There are a few reasons why excesses are applied to insurance policies. First, they help to lower the cost of handling and settling claims. This allows insurers to remain in business and can help premiums to stay low. Excesses can also help to deter fraud as paying an excess means that the policyholder must contribute too.

Do all insurers have the same excesses?

No. Excesses differ from policy to policy and insurer to insurer. It is important to review excesses when comparing and buying an insurance policy. Typically, the higher the excess, the less you might pay in premiums, and vice versa. Although, it is important to note that a higher excess means you may end up paying more out-of-pocket if you need to make a claim.

Can I, or the insurer, change the excess?

Some insurers allow you to nominate the excess you would like to pay. In turn, the chosen excess impacts the premium you pay. For example, an insurance policy might be cheaper because you nominate a higher excess. However, other insurers, like EBM RentCover, have set excesses for all products (this means they cannot be altered at time of application). While EBM RentCover has set excesses, sometimes excesses are reviewed and updated across the board in line with industry standards.

Where do I find the excesses?

Excesses are typically detailed in the policy Product Disclosure Statement.

When do you pay an excess?

If you never need to make a claim, you will never need to pay an excess. An excess only applies at claim time for the loss or damage you have experienced.

Do you just pay one excess at claim time?

You must pay the excess for all policy features that you are claiming for. So, depending on the circumstances of the damage and/or loss that you are claiming for, you may have to pay more than one excess. For example, if you have a RentCover Ultra policy and are claiming for loss of rent, malicious tenant damage and water damage to contents, the excess is $0 + $400 + $500 = $900 total.

What if I don’t want to pay the excess?

When you take out an insurance policy, you are essentially entering a contract. And that contract outlines the excesses that must be paid. To recoup your losses through insurance and have a claim settled, the excess must be paid (or subtracted from the claim amount).

Still have questions?

At EBM RentCover, we are here to help. If you have any questions about cover, excesses or claims, give our team a call – 1800 661 662.

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.