Understanding insurance excess, exclusions and limits

An insurance policy should be compared on more than its premium. The excess, exclusions, limits and claim conditions determine what protection is actually available and how much the policyholder may still need to pay when something goes wrong.

Understand the policy excess

The excess is the amount the policyholder must contribute towards an accepted claim. A policy may contain a compulsory excess, a voluntary excess or both. Different excesses may apply to different types of claim.

• Compulsory excess set by the insurer
• Additional voluntary excess selected by the customer
• Separate excesses for particular events or possessions
• Whether the excess applies once or to each part of a claim
• Whether the possible claim value is greater than the total excess

Read the exclusions

Exclusions identify circumstances the policy does not cover. Common examples can include wear and tear, undeclared business use, unattended belongings, pre-existing damage or a failure to take reasonable precautions. The exact wording matters.

Compare cover limits and sub-limits

The headline cover amount may contain smaller limits for individual items or categories. Check single-item limits, valuables limits, temporary accommodation, legal expenses and any other section relevant to the risk being insured.

Check policy conditions

• Information that must be disclosed when applying
• Security, maintenance or storage requirements
• Time limits for reporting an incident
• Documents, receipts or photographs required for a claim
• Changes in circumstances that must be reported
• How renewals and cancellations are handled

Consider affordability at claim time

A higher voluntary excess may reduce the quoted premium, but it also increases the amount that must be found when claiming. Compare the saving with the total excess and consider whether that contribution would remain affordable.