In a car insurance policy, you will come across a term or clause named “excess.” So what does excess in car insurance mean? We shall explain the term excess, including compulsory excess, in this article.
What is excess?
Excess is the first payment you need to make when you claim your insurance before your insurer covers the remaining amount. You will have to pay an excess even when you are not at fault.
However, note that excess does not apply to any loss or damage caused by fire, explosion, lightning, burglary, housebreaking, theft, third-party property damage or bodily injury claims.
Types of excess
There are two types of excess which are compulsory excess and voluntary excess.
Let us go through the meaning of each excess type.
Voluntary excess
Voluntary excess is the amount you volunteer to pay when you make a car insurance claim. Though some insurers require voluntary excess, some insurers do not impose voluntary excess. However, your insurance premium may be higher. For your information, the amount of voluntary excess varies across insurers.
There are several reasons as to why you are required to pay for excess:
- The vehicle owner is below 21 years old
- A high risk of the car being stolen
- An old vehicle
The excess amount is a certain percentage of the car sum insured.
Compulsory excess
For a compulsory excess, before you can make an insurance claim, you will have to bear an excess fixed at RM400, if you or the person driving your car with your consent:
- Is below 21 years old
- Holds a provisional (P) or Learner (L) driver’s license
- Is not named in your insurance policy as a named driver
Example:
Aida runs into an accident while driving her father’s car. Although Aida is the named driver of the car, her father still has to pay the compulsory excess of RM400 as she is below 21 years old.
Do policyholders get a refund on compulsory excess?
Policyholders must pay the compulsory excess of RM400 for the situations mentioned above. Therefore, the money will not be refunded to the policyholders even if they are not the party at fault.
Waiver of compulsory excess
Even though it is mandatory to pay compulsory excess, some insurers offer waivers of the excess as additional coverage for comprehensive policyholders.
The waiver of compulsory excess will relieve the financial burden of the policyholders.
Example:
Let us consider the situation experienced by Aida in the earlier example. With the waiver of compulsory excess, Aida’s father will not have to pay for the RM400 excess as he is exempted from it.
Refer to our visual below for a better understanding:
The total amount of the accident claim caused by Aida is RM3,000.
How much does the waiver of compulsory excess cost?
The additional premium for the waiver of compulsory excess is only between RM20 to RM30 for private cars. Instead of paying RM400 for the excess, we recommend that you get this additional coverage to save your money.
Do all insurance companies offer waivers of compulsory excess?
Not all insurers offer this additional coverage in their comprehensive policy.
If you are looking to get this add-on coverage, MSIG, Liberty Insurance, and Tokio Marine are among the insurance companies that offer this coverage.
In addition, some insurers offer waivers of compulsory excess for their comprehensive policyholders for free such as Takaful Ikhlas.
Understand your insurance policy
As a car owner, it is crucial that you understand the important clauses in your policy to ease your insurance claim in the future. For instance, if you are not aware of the excess clauses in your policy, you may question why you have to pay RM400 when making an insurance claim where you are not at fault.
Besides, understanding the important insurance clauses will help you secure a better and cheaper insurance plan. This is because not all insurance companies offer similar additional coverages for car insurance.
Hence, it is always best that you compare car insurance policies before you purchase any insurance plan. For your convenience, you can compare up to 15 insurance brands at one of the largest insurance comparison sites in Malaysia, Bjak. Start by getting your free car insurance quotes online at Bjak.my today.
Bjak is one of Malaysia’s biggest insurance comparison websites, offering policies from over 10 brands. Get your free insurance quote from Bjak today!
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