Insurance policy has become an integral part of the life of the modern man. Insurance companies have become a next stop for every new purchase, specifically every expensive purchase for people all across the globe. Insurance companies have come up with policies that cover everything from a house and car to laptops and mobile phones.
What Is Meant By Insurance Excess?
If you are an insurance holder, one of the first questions that is sure to haunt your mind is with respect to insurance excess. What is exactly meant by the term? Well, putting it simply, an insurance excess is that part of the claim that is not paid for by the insurance company. And how does it exactly work? Consider a situation where your car insurance has an excess of R1500. Now let us think of a hypothetical situation where your car meets with an accident and you place a claim of R7500. The insurance company will then reimburse R6000 of your claim, with you having to pay the rest of the amount.
Opting For An Increase In The Excess- What Does It Mean For Insurance Premium?
If you have been covered under an insurance policy, then it is quite obvious that you will have to pay a certain amount of money as insurance premiums periodically. And the policies offered by a majority of these insurance companies have a compulsory clause of an insurance excess. So, how exactly does the entire excess thing affect the insurance premium?
If you are looking for cheaper insurance premium, opting for an increase in the excess might be a good thing to do. And a cheaper premium means that you need to pay a lesser amount of money to hold on the insurance cover.
The equation between a cheaper premium and an increased excess might apparently prove to be a bit confusing. However, it is not so. When you opt for a hike in the insurance excess, it means that you are actually ready to bear greater a greater amount of the claim. In other words, the insurance company will have to reimburse a lesser amount. And this leads to the company rewarding the policyholders with cheaper insurance premiums. Opting for an insurance hike might be especially appealing if you do not have a record of claims. However, one should go for it only when they are absolutely sure that they will be able to handle this increased amount along with the standard excess in case of a claim.
What Are The Pros Of Opting For An Insurance Excess?
Excess in an insurance policy has a number of advantages. Here is taking a look at some of them.
- As a policyholder, you are sure to notice a remarkable improvement in the cash flow what with the entire deal coming at a much cheaper cost than primary insurance policies.
- Excess also allows the insured to handle claims of smaller amounts more frequently.
- Opting for an insurance policy that has an excess, more than often, comes at a rate that is comparatively lesser than primary insurance policies.
- And last but not the least, the policyholder will have an immediate contractual liaison with the excess insurer.