One in seven UK adults admit they have no understanding of how excesses on insurance policies work, says GoCompare car insurance.
Of the 2000 people who were interviewed as part of the research, a fifth – 21% – also said they don’t understand or are not sure of the difference between compulsory and voluntary excess when asked by the UK comparison site.
A further 41% claimed to only have ‘some’ understanding of how excesses work, with just a third describing their understanding as ‘good’.
Excess amounts are included in car, home and most other kinds of insurance policies as the amount a policy holder is required to pay out themselves before further costs can be claimed from the insurer.
The total excess is made up of a compulsory excess and voluntary excess amount – the two excesses are added together and must be paid upfront, or are deducted from any settlement in the event of a claim. The compulsory excess is set out by the insurer and cannot be changed. The voluntary excess is an amount chosen by the policyholder, often in exchange for a lower monthly premium, and is payable on top of the compulsory excess.
If someone then needs to make a claim on their insurance policy, the value of that claim must exceed the total excess. For example, if the voluntary excess and compulsory excess are both £250, the total excess is then £500. But if the value of repairs was less than the £500, a customer would not be able to claim.
The research showed that the younger a person is, the less likely they are to understand insurance excesses. A quarter of 18 to 24 year olds said they do not understand insurance excesses at all, and only 12% described their understanding of them as ‘good’.
One in five 25 to 34 year olds and a quarter of all those aged 35 to 44 said their understanding of excesses was ‘good’, meanwhile, with a half of all those aged 45 and above claiming the same.