Insurance is one of those things that you never want to think about. You go in, sign a few papers, and then head home. Do you really know all the fine details of your insurance policies? Or are you just hoping that they never will occur?
If you end up needing to make an insurance claim, how can you be sure that you are getting the right claim amount? As frustrating and annoying insurance and its policies can be, you need to spend the time researching it to make sure you know exactly what you are paying for. Do you know what an excess insurance policy is? Not many people do, however they can be extremely useful and help protect you in more severe cases. There are several things to consider when looking at excess insurance policies. First of all, what are they? Next, you have to understand the type of excess insurance policies as some are compulsory, and some are voluntary. Finally, it is important to understand if it is worth it to increase your excess policy or reduce it. Here are examples of excess insurance policies and why they are useful.
What is an Insurance Excess?
An insurance excess is the amount of money that you have to pay when you are making a claim. For example, if you have a home insurance excess of €500 and you file a claim that will reward you with €2000, you will end up with €1500. An excess takes away from the money they will give to you. Wouldn’t it make sense to have your excess as low as physically possible? While on the outside it seems like having an extremely low beneficial, there are severe downsides to lowering it. Along with this, there are several types of excess policies, compulsory and voluntary. It is important to figure out what each one means and how you can use these.
Compulsory Excess Policies
Compulsory excess policies are exactly how they sound. The insurance company is making this a mandatory excess that you have to pay while filing a claim. It is important to understand that insurance companies are business as well and at the end of the day they need to make money also. If all they did was hand out money to everyone without expecting anything back, they would be out of business and you would be out of luck with an insurance policy. No matter how low you want to make your excess, you will not be able to lower it. Understanding compulsory excess policies is a vital step to ensuring you make the right decision in terms of your excess policy.
Voluntary Excess Policies
Just like compulsory excess policies, voluntary excess policies once again, are exactly how they sound. With voluntary excess policies, you can work to choose how much your excess is. This means that you could opt in to a higher excess policy, or you can opt into a lower excess policy. Remember though, that you cannot opt into an excess policy that is lower than the compulsory excess policy. Why would you want a high excess policy? There are several factors to consider.
Should I Increase My Excess?
On the outside, it might be obvious to see that you should keep your excess as low as possible. There is so much more to this though than just the numbers. Keeping an extremely low excess will cause your monthly rates to skyrocket as you will be paying much more to your company. Keeping a high excess will lower your rates, however when disaster strikes, you will find yourself receiving much less from the insurance company. Understanding these policies and knowing the difference can help you make an educated decision about what excess policy is best for you. If you are in an area that is prone to disasters, keeping a lower excess would help as disaster is more likely to strike you. In an area where you do not have to worry, a high excess would be okay, however you might find yourself in trouble if an extremely rare disaster were to strike. Increasing your excess provides benefits in the form of cheaper monthly payments, while decreasing your excess provides benefits in the form of a higher claim amount. Weighing the benefits and determining the perfect middle ground is recommended to find a good insurance policy.
Take the time to understand the insurance policy you are getting. Look at the excess policy and figure out if you want to lower the excess or raise it. Remember to factor in the benefits of each policy and determine which one works best for your living area and your financial situation. Never get stuck agreeing to an insurance policy you haven’t read or don’t need. What disasters are you worried about?