Higher excess for lower premium — when does it pay off?
Most car insurers offer a choice: pay a higher annual premium for a lower excess (the amount you pay out-of-pocket per claim), or accept a higher excess in exchange for a lower premium. The maths is straightforward: high-excess wins if your premium saving over time exceeds the extra excess you'd pay out on actual claims. The trade-off is sensitive to your honest expected claim frequency.
The flip-point: annual premium saving × 10 years = additional excess × claims per decade. If your annual premium saves $300 by choosing $1500 excess instead of $500 excess (additional $1000), you're ahead as long as you have fewer than 3 claims in the next 10 years. Most claim-free drivers (the average is around 1 claim per decade) come out ahead with the higher excess.
The right answer depends on your driving history and exposure. Recent claims, less-experienced drivers in the household, longer commutes, or living in higher-risk areas push toward keeping excess low. A long claim-free history and stable driving patterns usually justifies the higher excess option. Watch for hidden excesses: under-25 driver excess, hit-and-run excess, and standard age excess can stack and inflate the total payable per claim — read the PDS carefully.