Do I need a large excess on my house insurance

Is It a Good Idea to Have a Large Excess on My Home Insurance?

Caeva O'Callaghan | May 26th, 2020

It can be, but it all depends on what kind of lifestyle you lead, how much disposable cash you need month to month, and if you’re planning on making more than a few claims.

If you don’t plan on making a claim on your house insurance unless things go disastrously wrong, it’s a good idea to have a large excess. A large excess can help lower your premiums, meaning you’ll pay less month to month. However, if you need to make a claim you’ll end up paying a larger one-off fee.

In this article, we’ll cover such questions as:

  • What is an excess on my home insurance?
  • When do I pay an excess on home insurance?
  • Is it better to have a bigger or smaller excess?

If you think you’ll need to make more frequent, smaller claims on your home insurance, a large excess will make that more difficult.

What is a home insurance excess?

The excess is the amount you pay towards a claim before your insurance provider makes its contribution. For example if your excess is €250 and you make a claim for €1,000, your insurer will pay out €750. Think of it as the price of making a claim.

There are two types of excess, compulsory and voluntary. Compulsory is a flat fee decided by your insurance provider. You’ll be notified of this when you take out your policy. Not every policy will have a compulsory excess, but they are common.

A voluntary excess, on the other hand, is an amount you can control. A higher excess usually means a lower premium. This means if you agree to pay a bigger one-off fee in the event you make a claim, the insurance company will lower the monthly cost of your policy.

Large vs small excesses

This may seem like a no-brainer. Lower monthly costs in return for a promise to pay more, but only if you make a claim? Sounds great! But, it may not turn out as rosy as you think.

Increasing your excess may save you money on a short term basis. But you don’t want to be landed with a huge excess if the worst happens and you can’t afford to pay. It might be nice to have those extra euros in your pocket every month, but you’ll wish you saved them if your house is damaged and you suddenly have a large excess to pay.

After all, fire, flood and theft are all traumatic events. No one is pleased about having to claim on their home insurance. Being lumped with a large excess bill is an unnecessary headache that might only kick you when you’re down.

However, there are some cases in which a large excess may be the best option. If you need to tighten your belt for a few months, for example. Reducing your monthly outgoings by increasing your excess could be a helpful way of tiding you over. Of course, this means you’d need to be extra careful you don’t need to make a claim in the meantime.

Lifestyle and risk

Which kind of excess you choose depends on how you live, your risk level, and how you plan on using your policy. This is why it’s always a great idea to consult a broker to hash out exactly what kind of policy you need.

For example, if you’re the type of person who is unlikely to claim unless the roof has blown off or the house is burnt down to the ground, a large excess may be the way to go. If you’re only planning on claiming on very rare occasions, it makes sense to lower your monthly payments. Saving money providing you only claim for major losses is sensible for most people.

However, if you are the type of person who will claim for a new telly when your kids play rugby in the living room, a small excess is the way to go. This not only depends on the kind of person you are, but the kind of belongings you have. A high-risk household with lots of valuables and lots of risk – such as small rugby players – will need to make claims more often. And in that event, you want the excess to be as small as possible.

Keep in mind that, in some cases, you won’t have a choice when it comes to excess. This is because certain risks are very costly to upt right. For instance, subsidence cover often comes with a policy excess of between €500 to €5000. It’s one of the most expensive repair operations you can face, so more of the cost is shared between the insurance provider and the customer.