When you take out an insurance policy your insurance company will ask you to pay an excess towards any claim you make on your insurance policy.
Most insurance companies have a standard basic excess which is set by them. From there, you have the option in some cases, to lower or increase your excess amount. If you vary from the insurers standard basic excess, you must expect your premium to change as well.
Choosing a higher excess may in some instances calculate a cheaper premium and your insurance policy will cost less in the long run, so long as you don't make a claim.
If you decide to increase your excess to save a few bucks on your annual insurance premium you're also agreeing with your insurer that when you need to make a claim on your policy, you will pay out this extra amount.
Prior to you making this financial decision you must first consider whether you can in fact afford your chosen excess amount if a claim where to occur.
As you can clearly see in our example above, increasing the excess on our clients contents insurance by $200 has put no extra money back in the clients pocket, yet would only put a bigger hole in their pocket at claim time.
By increasing the excess for their contents, it has only saved them a total of $2.21, yet if a claim were to occur, they would be required to pay an extra $200.
If you were to increase your policy excess it would be of great benefit to your insurance company as it would eliminate all the smaller claims being made in the first instance. Example; you wouldn't claim for your damaged reading glasses worth $200 if your excess is $500.
No two insurances policies are ever the same, neither are their excesses and they don't all apply in the same situations. So if you're looking to save on your insurances, you are best to complete a comprehensive review with an experienced insurance broker. They can assist in tailoring a policy to best suit your own personal requirements.
So in conclusion, no, increasing your policy excess on your insurance is not always worth it.
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.
All information above has been provided by the author.
Abbie Wilson, National Insurance Brokers, ABN 22165146789, AFSL 233750
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