Voluntary Excess

A voluntary excess is an additional amount you choose to pay on top of the compulsory excess when making an insurance claim. Choosing a higher voluntary excess usually results in a lower annual premium.

It’s a trade-off. You pay less each year for your insurance, but you pay more out of pocket if you need to claim.

Why It Matters

• It gives you control over your premium by adjusting how much risk you’re willing to absorb yourself.
• The savings on your premium can be meaningful, especially on motor vehicle and property insurance.
• But if you set it too high and then need to claim, the combined excess (compulsory plus voluntary) could be a real hit.
• It’s a personal decision that depends on your financial situation and how likely you are to claim.

How It Works

• Your insurer sets a compulsory excess (say $500). You can’t change this.
• You choose a voluntary excess on top (say $250).
• If you make a claim, you pay $750 total ($500 compulsory + $250 voluntary) before the insurer pays.
• In return, your annual premium is lower than it would be with no voluntary excess.

Simple Examples

• Your car insurance has a $600 compulsory excess. You add a $400 voluntary excess. Your premium drops by $150 per year. If you claim, you pay $1,000 out of pocket.
• Your business insurance has a $1,000 compulsory excess. You add a $1,000 voluntary excess to reduce costs. A claim means $2,000 out of pocket.
• You set a $0 voluntary excess because you want the lowest possible out-of-pocket cost at claim time. Your premium is higher, but you only pay the compulsory excess if you claim.

Common Mistakes or Misunderstandings

• Setting it too high to chase premium savings. If you can’t comfortably afford the combined excess when a claim happens, the savings aren’t worth the risk.
• Forgetting it stacks on top of the compulsory excess. Your total out-of-pocket cost at claim time is both amounts combined.
• Not reviewing it each year. Your financial situation and the value of your assets change. What made sense last year might not make sense now.
• Thinking a higher excess always makes sense. For some policies, the premium reduction from increasing the voluntary excess is minimal. Check the actual difference before deciding.

When to Speak to a Broker

If you’re not sure how to balance your excess and premium, or you want to see exactly how much you’d save at different voluntary excess levels, your broker can model the options for you.

Need help?

If you want to find the right balance between your excess and premium, reach out to Tank Insurance and we’ll help you work out what makes sense.

Related Terms

• Excess - The voluntary excess sits on top of the compulsory excess. Together they form your total out-of-pocket cost.
• Insurance Premium - A higher voluntary excess reduces your premium. A lower voluntary excess increases it.
• No Claim Bonus - Choosing a higher voluntary excess might make you think twice before claiming for small losses, which helps protect your no claim bonus.