I remember mentioning that I would post something on excesses when I did my first post. Insurance is quite simple before you get a whole lot of jargon thrown your way. There are certain terms and conditions you should fully understand before taking out your insurance and one of them is the excess.
An excess is simply money you should pay/contribute in respect of every loss that you launch with your insurance company. For example if you are involved in an accident and you need $200 to repair the car. If the excess on your policy is 10% it means you'll need to pay $20 for the loss and the insurance will pay the difference of $180.
You are probably asking yourself this question in your head right now: Why does the insurance company make me pay an excess? The answer is simple really. This is meant to encourage you to be more careful. There are certain people who are 'frequently unfortunate' and are therefore always getting into accidents. The thought of always paying an excess after a loss will make them more careful or atleast that is the intention of the excess.
Some insurance companies have higher excesses for more risky situations. For example you are likely to pay a higher excess if you are an inexperienced driver (with less than 5 years on your drivers license or younger than 25 years of age), or if your vehicle is used for commercial purposes such as a fuel tanker.
Then sometimes you will find a policy has a 'minimum' which is basically a minimum amount which you can launch a claim for. For example if the minimum on your policy is $100, you can not launch any claim for losses under $100. The reason why insurance companies do this is because some losses cost more in administration than the actual claim. For example a $10 claim can cost the insurance more than $25 to administer.
I encourage you to go through your insurance papers and pay greater attention to the excess endorsement as it will determine how much you could potentially pay in the event of a loss. Be careful of insurance companies that might lower their premium just to lure you and increase the excess. Do not fall for this! You will regret it later on after you incur a loss.