Travel Insurance Excess Explained

As any holiday goer knows, purchasing travel insurance after you have booked your holiday is more of a necessity than a nice to have. Travel insurance gives you the peace of mind you need to ensure that your financial investment is protected even before you have set off for the airport. It also provides you with a financial security net, which should the worst happen whilst you are away - you can rest assured that your policy will have your back.

However, when it comes to making a claim, there is one concept that can be confusing - excesses. In this comprehensive guide, you will find all the information you need to know about travel insurance excesses, ensuring that you can obtain protection on your terms and with a clear understanding of the financial implications involved.

What is a Travel Insurance Excess?

A travel insurance excess is an amount of money that policyholders are required to pay, towards a claim. It serves as a financial commitment from the policyholder to the insurance provider when claiming against your travel insurance policy. In other words, it is the portion of the claim that you will have to cover yourself.

Think of it as your stake in the insurance claim. By having to pay an excess, you're likely to only claim, when necessary, which in turn helps keep premiums lower for everyone. Additionally, the amount of the excess can often be adjusted based on your willingness to share more or less of the claim cost, affecting the premium you pay for your policy. In essence, it's a balance between the risk you're willing to accept and the premium you're willing to pay.

How Does an Excess Work?

When you make a claim, it is important to understand that an excess may either be deducted from your final settlement or payable by you up-front. The excess is the initial portion of any claim that you are responsible for, before the insurance provider steps in.

To explain further, let us consider an example: If your policy has an excess of £100 and you submit a claim for £500, the claim settlement will be adjusted to £400 after deducting the excess amount. On the other hand, if your excess is set at £200, the claim payment will be reduced to £300, as you will be responsible for a higher portion of the claim.

Understanding the excess amount is crucial in managing your expectations and making informed decisions when it comes to insurance claims. It is also important to note that excess amounts can vary depending on the type and level of cover you have in place.

Why do Travel Insurance Providers Charge an Excess?

Primarily, insurance providers charge an excess to discourage policyholders from lodging trivial claims, as this could inflate insurance costs for everyone. The idea is that by requiring a financial contribution towards a claim, policyholders are encouraged to use greater discretion in filing claims and typically save them for significant losses.

The bottom line: the higher the excess amount, the more unlikely policyholders are to make claims for smaller losses.

Excess amounts serve to mitigate the administrative expenses linked with handling minor claims. With an excess in play, insurance providers can allocate resources more efficiently, concentrating on addressing larger claims that demand greater attention and resources.

Who Has to Pay an Excess?

Unless explicitly specified in the policy wording, the excess is typically applicable on a per-person basis and is applied to the individual(s) making the claim. This means that if you are the sole individual on the policy and intend to make a claim, you will be responsible for the excess. Similarly, if a claim is being made on a group or family policy, an excess will be applied for individuals covered by the policy and making the claim.

To illustrate, consider a scenario where four people are travelling under the same policy, with each person's holiday costing £500. In this case, the excess is set at £200 per person. Now, suppose two travelling companions decide to cancel their trip, aiming to recover as much of their holiday cost as possible. However, due to the excess, they would only receive £600 between them, as they each must pay an excess of £200.

It is also important to note that in some claims, multiple excesses may be applied. Though rare, this usually occurs when a claim is made, and multiple areas of the policy come into effect. For example, suppose an individual is in an accident resulting in injuries and subsequent loss of their camera. In that case, the applicable excesses for medical expenses and personal belongings cover will be applied.

Understanding the specifics of your policy and the applicable excesses enables you to navigate the claims process more effectively and manage your expectations accordingly.

What are the Different Types of Excess?

It is important to be aware that there are two main types of excess, found within travel insurance policies.

Standard Excess
A standard excess is a set amount that your provider indicates that you must pay should you make a successful claim. This amount can vary between the different sections (personal belongings, cancellation etc.) of your policy.

Voluntary Excess
In some instances, insurance providers may give you the option, to apply a voluntary excess to your policy, which can help reduce your policy premium. This is an amount, set by you, before purchase. You will be expected to pay this amount (as well as the Standard Excess) for any claim where the voluntary excess is applicable.

For example, if the standard excess is £50 and you have applied a voluntary excess of £100, you will be expected to pay £150, should your claim be successful.

Is an Excess Always Payable?

An excess is not always applicable. In some cases, you may not need to pay an excess, depending on the area of your policy you are trying to claim from.

However, it is important to note that the specific excess amount can vary between different insurance providers. Therefore, it is crucial to carefully review the policy documents of the insurance policy you intend to purchase.

To give you a general idea, the table below outlines some commonly claimed items and indicates where you might expect to encounter an excess:

How do You Pay an Excess?

So, you might be wondering, at what precise stage of making a claim does the concept of excess come into play? The answer to this can vary depending on who your insurance provider is and the section from which you are claiming.

In certain situations, you may find yourself required to pay the excess amount upfront, essentially out of your pocket, before your provider steps in to cover the remaining costs associated with your claim.

Alternatively, if your claim is successful, your insurance provider may remove the excess amount from your payout. This method ensures that the excess is dealt with in a smooth and hassle-free manner, allowing you to focus more keenly on the outcome of your claim without the need for any additional steps or unwanted delays.

Unless of course, you have an excess waiver on your policy.

What is an Excess Waiver?

Some insurance providers offer an excess waiver, eliminating the need to pay an excess when filing a successful claim. With an excess waiver included in your policy, you can be confident that you will receive the full claimed amount without any deduction for excess.

However, opting for an excess waiver may result in a higher policy premium. Despite this, the added benefit it offers can be significant—especially if it means not having to pay a large amount upfront or receiving a substantially reduced payout. It is essential to carefully evaluate your options and weigh the benefits against the cost.

Ultimately, choosing a policy with an excess waiver can provide you with comprehensive coverage and financial protection when you need it most.

Will the Excess Affect my Insurance Premium?

Excesses are additional payments incorporated into travel insurance policies to offset upfront premium costs. Put simply, selecting a higher excess can notably decrease your premium expenses.

This approach can be advantageous, especially for frequent short breaks, where the likelihood of filing a claim is relatively low. Opting for a higher excess reduces insurers' risk, thus leading to lower premiums.

However, it is crucial to consider the nature of your trip. Engaging in physical activities like winter sports increases the likelihood of needing to file a claim. In such cases, a high excess could potentially complicate matters if a claim does arise. Thus, it might be prudent to invest a bit more in a policy with a lower excess or explore policies offering voluntary excess options, allowing you to set the excess amount yourself.

By meticulously assessing your unique circumstances and weighing potential risks, you can make a more informed decision when selecting a travel insurance policy tailored to your needs.

What Amount Should My Excess be?

This varies based on your circumstances. Suppose you are seeking specialised coverage for pre-existing medical conditions. In that case, it is worth noting that the medical cover provided in the policy may offer significantly more value than your excess. This becomes particularly beneficial if your condition is severe and demands extensive medical attention.

While evaluating the excess amount, it's crucial to ensure that you're getting value for your investment when making a claim. However, our recommendation is to first focus on finding suitable protection that matches your specific needs before getting too caught up with concerns about the excess. By prioritising obtaining travel insurance, you can have peace of mind, knowing you're protected in case of medical emergencies or unexpected situations.

In conclusion, mastering the ins and outs of travel insurance, including excess and excess waivers, is vital for safeguarding your finances while on the move. By grasping the details of these terms, you can make well-informed choices that match your travel requirements and financial situation.

Whether you go for a higher excess to reduce premiums or select a policy with an excess waiver, the key is to strike a balance that fits your situation. Remember, travel insurance is designed to provide you with peace of mind, enabling you to explore the world confidently, knowing you're ready for the unexpected.

Thoughtful planning and wise policy selection can transform potential travel mishaps into manageable challenges on your journey.