When you take out car insurance in Australia, one of the key decisions you’ll need to make is the level of excess on your policy. It might seem like a small detail, but it can have a big impact on both your premium and what you’ll pay if you need to make a claim. A lower excess means you’ll pay less out of pocket after an accident, but your premium will be higher. A higher excess reduces your premium, but you’ll need to cover more of the cost if something goes wrong. Here’s how to understand your excess and choose the right level for your situation.

What Does “Excess” Mean?

Your excess is the amount you agree to pay towards a claim before your insurer covers the rest. For example, if your excess is $800 and the repair bill after an accident is $3,000, you’ll pay the first $800 and your insurer will pay the remaining $2,200.

Excess usually applies per claim, not per year, and the amount can vary depending on the type of claim. Some insurers have different excesses for things like windscreen damage, theft, or accidents involving young or inexperienced drivers.

Why Your Excess Matters

Your excess is one of the main factors that influences the cost of your car insurance premium. The higher the excess, the lower your premium tends to be, because you’re taking on more of the financial risk yourself. A lower excess means the insurer takes on more risk, so your premium will be higher.

Choosing the right excess is about finding a balance between what you can afford to pay regularly and what you could manage to pay unexpectedly if you need to make a claim.

Pros and Cons of High and Low Excess

There’s no one-size-fits-all answer. The right excess depends on your financial situation, your driving habits, and your comfort with risk.

High excess – lower premium

• You’ll pay less for your insurance each month or year.
• You’ll need to pay more if you make a claim.
• Works well if you’re a careful driver, rarely make claims, and can afford a larger one-off payment if needed.

Low excess – higher premium

• You’ll pay more for your insurance, but less if you need to claim.
• Offers greater peace of mind, especially if you drive frequently or in busy city areas.
• A good choice if you prefer predictable costs and don’t want to risk a large out-of-pocket expense.

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How to Find the Right Level for You

When deciding on your excess, consider these three questions:

1. How much could you comfortably pay if you had to make a claim? If you could easily cover $1,000 or more in an emergency, a higher excess might make sense. If that would strain your budget, a lower excess could be safer.

2. How often have you made claims in the past? If you’ve been claim-free for years, you might benefit from a higher excess and lower premium. But if you’ve had several claims, a lower excess could save you money in the long run.

3. Where and how do you drive? If you mostly drive on highways or in regional areas, your risk of minor accidents may be lower. But if you often park on the street in busy suburbs or drive in heavy traffic, a lower excess might give you more peace of mind.

Check the Details

Excess amounts and rules can vary between insurers and policies. Some insurers offer:

• Flexible excess options – you can choose your own excess when you take out the policy.
• Reduced excess for certain claims – for example, windscreen repairs or if you use an approved repairer.
• Additional excesses – such as a young driver excess if someone under 25 drives your car.

Always read your Product Disclosure Statement (PDS) carefully so you understand when and how your excess applies.

You Can Adjust It Later

Your excess isn’t set in stone. You can usually change it if your circumstances change – for example, if you buy a new car, move to a different area, or your financial situation improves. It’s a good idea to review your car insurance each year to make sure it still suits your needs.

In Short: Balance Cost and Confidence

Choosing your excess is about finding the right balance between affordability and peace of mind. A lower excess gives you more security but costs more in premiums, while a higher excess saves you money upfront but means a bigger bill if you need to claim. By considering your budget, driving habits, and risk tolerance, you can choose an excess level that fits your lifestyle – and drive with confidence knowing your insurance works for you.