Insurance Excess Explained: Compulsory vs Voluntary, and How Much to Choose

By Alice T · PolicyChecker editorial team

Voluntary and compulsory excess, explained. Excess is the part of an insurance policy almost everyone agrees to without really thinking about — and then deeply regrets at claim time. It's the slice of any claim you pay yourself before the insurer pays the rest, and on a typical UK motor or home policy it's not one number but several, stacked. Get it right and you'll lower your premium without much downside. Get it wrong and you'll either overpay every year, or discover — the day the pipe bursts — that a claim you were counting on is barely worth making. This is the plain-English guide to how excess actually works, how it changes your premium, and how to choose a sensible amount.

What "excess" really means

If your policy has a £250 excess and you make a £1,000 claim, the insurer pays £750 and you cover the first £250. Simple enough — but the word hides a few traps, because most UK policies don't have one excess. They have several, and they stack.

Excess is different from a deductible in some other markets: in the UK, you don't "meet" it once per policy year and stop paying. It applies per claim, and if you claim twice in a year, you pay it twice.

Compulsory excess — what the insurer sets

Compulsory excess is fixed by the insurer. You cannot lower it; it's the floor for how much of any claim comes out of your pocket. Insurers use it to price in risk they consider unavoidable:

• On motor cover, younger drivers, newly-qualified drivers, or drivers with recent claims almost always face a higher compulsory excess — sometimes £250, £400 or more.
• On home cover, insurers often set a higher compulsory excess for properties in flood-prone areas, or for older buildings where escape-of-water claims are more likely.
• Named drivers or occasional drivers can trigger their own separate compulsory excesses on motor policies.

The compulsory excess is written on your policy schedule (sometimes called the certificate of insurance). It's the number you need to find first — every other decision starts from there.

Voluntary excess — the amount you choose

Voluntary excess is the amount you add on top, in exchange for a lower premium. Offer to shoulder more of any claim yourself, and the insurer rewards you with a cheaper price today. It's a lever, not a mystery: raising it reduces your yearly cost; lowering it costs you more up front but leaves you less exposed at claim time.

Typical voluntary excess options at UK quotes run from £0 to £500 or £1,000, in £50 or £100 steps. Some insurers cap it lower for less experienced drivers; others let you push it up to £1,500 on comprehensive motor cover.

Total excess = compulsory + voluntary

This is the number that actually matters, and it's the one people forget:

Your total excess on any claim = compulsory excess + voluntary excess.

A £150 compulsory plus a £200 voluntary means £350 out of your pocket before the insurer pays a penny. Two people can pick the "same" £200 voluntary excess and end up with wildly different real costs, because their compulsory excesses differ.

Worked example. Two drivers, same car, both pick a £250 voluntary excess:

• Driver A (experienced, no claims): compulsory £100 → total excess £350.
• Driver B (newly-qualified, one recent claim): compulsory £400 → total excess £650.

Same voluntary, nearly double the pain at claim time. Always read the total on the schedule, not just the voluntary number you picked at the quote.

The hidden per-peril excesses

On top of those two, many policies bolt on specific excesses for particular risks — and these are where the nasty surprises live:

• Home insurance, escape of water (a burst pipe or leak) frequently carries its own much higher excess — £350, £500 or even £1,000 on top of the standard excess. Escape of water is the single largest cost driver in UK home claims, which is why insurers ring-fence it.
• Home insurance, subsidence almost always has a separate excess of £1,000 or more.
• Home insurance, storm and flood may have their own excesses in higher-risk postcodes.
• Motor insurance, windscreen claims usually carry a separate, lower excess (£75–£125) — sometimes waived entirely if you use the insurer's repair network.
• Motor insurance, young or named-driver excesses can add £150–£500 for specific drivers on the policy.

So a policy advertised with a reassuring "£100 excess" might actually mean £600 if the thing that goes wrong is a leak. Always read the schedule for the per-peril excesses, not just the headline number — this is exactly the kind of detail that separates a cheap-feeling policy from a genuinely cheap one.

The impact of excess on insurance rates — how much you actually save

Raising your voluntary excess lowers your premium because you're taking on more of the risk. But by how much? The trade-off isn't linear, and it varies wildly by insurer, cover type, and your risk profile. As a rough rule of thumb from what UK quote comparisons typically show:

• Raising voluntary excess from £100 to £250 on comprehensive motor usually shaves 3–8% off the annual premium.
• Going from £250 to £500 typically saves another 3–5%.
• Pushing past £500 up to £1,000 often saves surprisingly little — sometimes only 1–2% more — because insurers know most claims fall well below that threshold anyway.

On home cover the effect is generally smaller: another £100 of voluntary excess might save £5–£15 a year. Escape-of-water and subsidence excesses are set by the insurer and rarely negotiable at all.

The lesson: run the numbers before you commit. If raising your excess £200 only shaves £12 off the annual premium, you'd need to go a decade claim-free to break even. If it saves £80, the trade is a lot more attractive.

How to choose the right excess — a simple method

1. Find your total compulsory excess first. That's your floor; you can't go below it.
2. Decide what you could pay tomorrow without flinching. £250? £500? Be honest about your emergency savings, not what feels reasonable in the abstract.
3. Set your voluntary excess so the total lands at that comfortable number. Not higher.
4. Check the per-peril excesses (water, subsidence, windscreen). If they're sky-high, factor that into whether the policy is right for you at all.
5. Run the price comparison. Ask the quote engine — or ring the insurer — what raising your voluntary excess by £100 or £200 saves per year. If the answer's tiny, don't do it.
6. Re-check every renewal. Insurers quietly adjust compulsory excesses year on year, especially after a claim. The number you agreed to last year may not be the number on this year's schedule.

The "is it even worth claiming?" test

Here's the trap excess sets. Suppose you have a £400 total excess and £700 of accidental damage. You can claim — but you'll only receive £300, and you'll likely lose your no-claims discount and see next year's premium rise. For small claims close to your excess, claiming can cost you more than paying for the repair yourself. Always do this quick sum before you claim:

Payout after excess − likely premium increase over the next 3 years − value of lost no-claims discount = what claiming is actually worth.

If that number is small or negative, pay for it yourself and keep your record clean. On motor cover in particular, a single fault claim can wipe out several years of no-claims discount and cost more in future premiums than the payout is worth.

Excess and your no-claims discount

Excess and no-claims discount are separate things that interact. Even a valid, paid-out claim usually dents your no-claims discount and raises future premiums — the Financial Conduct Authority's insurance conduct rules require insurers to consider your claims history at renewal. That's why a high excess plus a habit of claiming for small amounts is the worst of both worlds: you pay the excess and lose the discount. A sensible excess paired with self-funding the truly small stuff keeps your insurance cheap over the long run.

FAQ

What's the difference between compulsory and voluntary excess? Compulsory excess is set by the insurer and cannot be lowered — it reflects the risk they consider unavoidable. Voluntary excess is the amount you choose to add on top in exchange for a cheaper premium. You pay both when you claim.

Do I pay both compulsory and voluntary excess on the same claim? Yes. Every claim you make triggers the full total — compulsory plus voluntary — before the insurer pays anything. If both are £250, you pay the first £500 of the claim yourself.

How does increasing my voluntary excess affect my premium? On motor cover, moving from £100 to £250 voluntary typically saves 3–8% a year; £250 to £500 saves another 3–5%. On home cover the savings are usually smaller. Past £500 the savings often taper off sharply because most claims fall below that anyway.

Can I set my voluntary excess to zero? Sometimes, yes — many insurers let you set voluntary excess to £0. Your compulsory excess still applies. You'll pay a higher premium for the privilege, so it's only worth doing if you genuinely can't afford any out-of-pocket cost when you claim.

Is a £500 or £1,000 voluntary excess worth it? Only if two things are true: the annual saving is meaningful (compare quotes with different excesses), and you could pay the full total tomorrow without borrowing. If either fails, drop it back. A high excess you can't actually afford is a policy you can't actually use.

Does my excess apply to every claim on the policy? Yes — excess is per-claim, not per-year. Claim twice in a year, and you pay the excess twice. Different perils can also trigger different excesses on the same claim (for example, escape of water on home cover).

What's the "average clause" and how does it interact with excess? The average clause is a separate insurer right to reduce your payout proportionally if you're underinsured (see our guide on underinsurance and the average clause). Excess is deducted after any average-clause reduction — so being underinsured hurts twice.

Don't let excess be the thing you discover at claim time

The excess structure is one of the most important — and most overlooked — parts of any policy. Two policies at the same price can have wildly different excess setups, and the cheaper-feeling one can cost you far more the day something goes wrong. Before you buy, read the schedule for:

• The compulsory excess,
• Any voluntary excess you've set,
• And every per-peril excess (especially water and subsidence on home cover).

That's exactly the kind of small print PolicyChecker reads for you — surfacing the real, total excess on each peril in plain English, so you choose a policy with your eyes open instead of finding out the hard way. A few minutes before you buy saves you the worst surprise in insurance: a claim that, after excess, was never worth making.

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This guide is general information, not financial advice. For free, impartial guidance on choosing insurance, see MoneyHelper (the government-backed Money & Pensions Service) or Citizens Advice. Complaints about insurers go to the Financial Ombudsman Service. Insurers' conduct is regulated by the Financial Conduct Authority. PolicyChecker helps UK consumers understand an insurance policy before they buy — check a policy.