What is a Car Insurance Excess?
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One thing all car insurance policies have in common is having an excess (or two). However, despite its prevalence in car insurance policies, the car insurance excess can still cause confusion for some policyholders. Below, we break down what the types of car insurance excesses you may come across and how they can affect your claims.
What is an Excess?
When you purchase a car insurance policy, you'll notice that an excess applies for several types of claims. An excess is a deductible, or in other words, the amount of money you have to pay out of pocket before your insurance policy will step in and cover the rest of the claim. For instance, if your car gets damaged and the cost to repair it is S$3,000 and you have a S$700 excess, you will pay the first S$700 out of pocket and the remaining S$2,300 will be paid by your insurer. Excesses are implemented to prevent drivers from claiming for every small mishap that happens to their car so as not to cause a widespread increase of car insurance premiums. There are three main excesses that you will come across in a standard car insurance policy in Singapore: the Standard Excess, Young/Inexperienced Driver Excess and Windscreen Excess.
Standard Excess
The standard excess applies to claims relating to the loss or damage to your car. This means you will have to pay a certain amount out of pocket if your car was damaged, lost or stolen, or if you need your car or any of its accessories replaced. However, the standard excess is usually not applicable if the damage was due to fire or theft. Unlike the other types of car insurance excesses, you have the option of choosing the standard excess amount when purchasing or renewing your policy. Typically, the default car insurance excess is between S$600 and S$700, although you have the option of changing your excess to anywhere from S$0 to S$2,500.
Young or Inexperienced Driver Excess
Young drivers in their early 20's or drivers with less than 2 years of experience will be subjected to a Young/Inexperienced Driver (YIDR) excess. It will be a set sum (meaning you can't change the excess amount) and will be added on top of your standard excess. Typically, the YIDR excess is quite large—often between S$1,000 and S$2,500—mainly because insurers see younger and inexperienced drivers as higher risk. Since this is a large sum to be responsible for, you may benefit from finding an insurer that lets you add an option young rider excess waiver for an extra fee to avoid paying these high out of pocket costs.
| How the YIDR Excess Works | |
|---|---|
| Total Cost of Repairs | S$5,000 |
| Standard Excess | S$700 |
| YIDR Excess | S$2,500 |
| Total Excess Responsibility | S$3,200 |
| Insurance Company Pays: | S$1,800 |
Windscreen Excess
The windscreen excess is a standard feature for most car insurance policies in Singapore. It is the amount you'll be responsible for if you have to claim for windshield damage or replacement. The average windscreen excess is S$100, although some insurers may charge a smaller excess (for instance, S$25) if the windscreen only requires repair. Furthermore, some insurers will also change the excess amount depending on which workshop you use. For instance, some insurers may not charge you an excess at all if you use their approved workshop for windshield repairs.
How Much Excess Should You Choose?
What your standard excess should be depends on whether you prefer to pay cheaper premiums or have less out of pocket costs. This is because the standard excess you choose changes your total premium—the lower the excess, the higher your premium will be and vice versa. We found that on average, your annual premium increases between S$10 and S$20 for every S$100 excess decrease. Thus, if you don't mind paying a bit extra per year on your premiums, then you may be able to save hundreds of dollars in out of pocket costs should you get into an accident.
Do Other Insurance Policies Have Excesses Too?
Car insurance policies are far from being the only type of insurance to make policyholders pay an excess. For instance, motorcycle insurance policies have similar excess obligations, including a standard excess and a young rider excess. Furthermore, you may also come across excesses in home insurance and domestic worker insurance. However, you should note that unlike car and motorcycle insurance policies, excesses in other insurance policies are not as widespread and may only be found with a couple of insurers. Below, we have listed some examples of excesses we've come across in different insurance policies. To ensure you won't be surprised with out of pocket costs regardless of which insurance policy you are buying, you should always read the policy wording.
Examples of Excesses in Other Insurance Policies
| Type of Excess | Average Amount |
|---|---|
| Motorcycle Insurance | |
| Standard Excess | S$300-S$750 |
| Young/Inexperienced Rider Excess | S$300-S$500 |
| Home Insurance | |
| Contents Excess (Force Majeure Claims) | S$200-S$350 |
| Bursting Water Tank Excess | S$200 |
| Domestic Worker Insurance | |
| Outpatient Medical Expense Excess | S$10 |
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Anastassia is a Senior Research Analyst at ValueChampion Singapore, evaluating insurance products for consumers based on quantitative and qualitative financial analysis. She holds degrees in Economics and International Business Management and her prior working experience includes work in the capital markets sector. Her analyses surrounding insurance, healthcare, international affairs and personal finance has been featured on AsiaOne, Business Insider, DW, Vice, Her World, Asia Insurance Review, the Australian Institute of International Affairs and more.