How Much Excess Should I Pay UK 2026

Last reviewed: 26 April 2026

What the voluntary excess decision involves

Every UK motor insurance policyholder faces a voluntary excess decision at quotation. The compulsory excess, set by the insurer, cannot be changed. The voluntary excess is the policyholder's choice: how much additional self-insured contribution to apply to any claim, in exchange for a lower annual premium.

The voluntary excess decision is a financial trade-off with two components. First, the premium saving: how much less the annual premium is as a result of selecting a higher voluntary excess. Second, the claim cost: how much more the policyholder pays out-of-pocket if a claim occurs, compared to having selected a lower voluntary excess.

The optimal decision depends on the relationship between these two components for the specific policyholder's risk profile. A high voluntary excess is optimal where the annual premium saving exceeds the probability-weighted expected additional claim cost. A lower voluntary excess is optimal where the claim probability is high enough that the expected additional cost approaches or exceeds the premium saving.

The premium-saving curve: how much does excess save?

The premium reduction from increasing the voluntary excess is not linear, it follows a non-linear curve that produces different savings at different excess increments. Indicative savings patterns from market data for a standard-risk driver profile:

Moving from £0 to £150 voluntary excess typically saves approximately £15 to £30 per year. This first increment is often the least efficient, the premium saving per pound of excess taken on is small because the insurer's assessment of very small claims risk is already priced at zero excess.

Moving from £150 to £300 voluntary excess typically saves £20 to £50 per year, a more efficient increment. Excluding claims below £300 removes a significant frequency category from the insurer's expected cost calculation.

Moving from £300 to £500 voluntary excess typically saves £40 to £80 per year. Moving from £500 to £1,000 typically saves £80 to £200 per year for higher-premium profiles. Above £1,000, the incremental savings diminish, the insurer has already excluded the bulk of small and medium frequency claims from their expected cost calculation.

These ranges are indicative. The specific savings vary substantially by: the policyholder's age (young drivers see larger savings from higher excess because their actuarial base premium is higher); the vehicle's Thatcham group (higher-group vehicles produce larger absolute savings from excess adjustment); and the insurer's specific pricing model.

When high voluntary excess makes financial sense

A high voluntary excess is most financially rational for drivers who combine a low claim probability with the ability to fund the excess if a claim does occur.

Low claim probability drivers include: those with five or more years of clean NCD history and no recent incidents; low-annual-mileage drivers (under 5,000 miles per year); drivers in low-risk postcode areas; and older experienced drivers (40 to 65) in standard vehicles. For these profiles, the probability of a claim in any given year is statistically low, perhaps 5 to 10 percent, meaning the expected additional cost of a higher excess is small relative to the annual premium saving.

Funding ability: a voluntary excess of £500 is rational only if the policyholder can genuinely fund £500 out-of-pocket if a claim occurs. If the excess is set at a level that would create financial hardship in the event of a claim, it is too high. The excess does not need to be held in a dedicated account, but the policyholder should have realistic access to the funds.

When lower voluntary excess is more appropriate

Lower voluntary excess is more appropriate for drivers who: have a higher statistical claim probability (younger drivers, high-mileage commercial use); have recently experienced claims (suggesting a pattern of exposure); drive a vehicle in a high Thatcham group where even minor incidents produce large claim costs; or are constrained in their ability to fund a large out-of-pocket excess payment.

For vehicles on finance, PCP, HP, or lease, the finance provider typically requires Comprehensive insurance but does not mandate a specific excess level. However, where the vehicle is financed and a claim results in a total loss, the policyholder must fund the excess from personal resources before the insurer's settlement contributes. A high voluntary excess on a financed vehicle that is subsequently declared a total loss creates a significant immediate cash requirement.

The practical decision framework

For any specific policyholder, the voluntary excess decision can be structured as follows. Obtain quotes at three or four voluntary excess levels, typically £0, £250, £500, and £1,000. Record the annual premium saving from each increment.

Calculate the probability-weighted expected additional cost at each excess level. Use an annual claim probability consistent with your risk profile, 7 to 10 percent for a standard-risk driver with no recent claims. Multiply the additional excess by this probability to get the expected annual additional cost.

Where the annual premium saving from a higher excess exceeds the expected additional annual cost, the higher excess is rational. Where the expected additional cost approaches the saving, the advantage narrows and the break-even excess level has been reached.

Key Figures

Frequently Asked Questions

What voluntary excess should I choose?

The optimal voluntary excess depends on your claim probability and your ability to fund the excess if a claim occurs. For low-risk drivers with clean histories and low mileage, higher voluntary excesses typically provide good value. For higher-risk profiles or drivers with cash-flow constraints, lower excesses are more appropriate.

Does a higher excess always reduce the premium?

Yes, a higher voluntary excess always produces a lower annual premium. However, the saving is not linear: the first increments of voluntary excess often produce larger proportional premium savings than subsequent increments at higher levels. Compare quotes at multiple excess levels to find the most efficient point.

Can I change my voluntary excess mid-policy?

Yes, but it requires a formal mid-term adjustment from the insurer, which typically produces a premium recalculation and may involve an administration fee. The excess is most efficiently set at the correct level at the point of quotation.

What happens if I cannot afford the excess when making a claim?

The excess is typically deducted from the claim settlement rather than paid separately. If the claim is for repairs, the repairer receives the full repair cost from the insurer and the policyholder's excess contribution is collected by the insurer or repairer. If the excess exceeds the claim amount, the insurer contributes nothing and the claim is effectively self-funded.

Should I increase my excess to reduce premiums on a financed vehicle?

With care. A high voluntary excess on a financed vehicle means you must fund the excess personally in the event of a total loss before the insurer's settlement contributes. Ensure the excess is set at a level you can genuinely fund as an immediate cash requirement following a total loss.

Sources & Verification

• ABI Motor Insurance data: https://www.abi.org.uk
• FCA ICOBS, fair treatment: https://www.fca.org.uk
• Road Traffic Act 1988, section 143: https://www.legislation.gov.uk/ukpga/1988/52
• HMRC Insurance Premium Tax: https://www.gov.uk/guidance/insurance-premium-tax
• BIBA, Find a specialist broker: https://www.biba.org.uk/find-insurance/
• FCA Register: https://register.fca.org.uk
• gov.uk, Driving without insurance: https://www.gov.uk/vehicle-insurance/penalty-for-driving-without-insurance

This article is for informational purposes only and does not constitute financial advice. Always verify rates with official sources before making any financial decision.