Compulsory excess is the fixed amount an insurer requires a policyholder to pay towards any claim. It is set by the insurer based on risk factors such as the driver's age and the vehicle, and it cannot be reduced by the customer.
In one line: Compulsory excess is the insurer-set claim contribution that the customer cannot change.
How compulsory excess works
The insurer sets the compulsory excess as part of underwriting the policy, reflecting factors like a young or newly qualified driver, a high-value car or a high-risk address. It applies to every valid claim.
If a claim settles at 1,800 GBP and the compulsory excess is 300 GBP, the insurer pays 1,500 GBP. Where a voluntary excess of 200 GBP has also been chosen, the total excess becomes 500 GBP and the insurer pays 1,300 GBP.
Some policies carry additional compulsory excesses for specific risks, such as windscreen damage or inexperienced drivers.
Compulsory excess vs voluntary excess
Compulsory excess is imposed by the insurer and is non-negotiable, while voluntary excess is an amount the customer chooses to add on top to lower the premium.
Both are charged together on a claim, so a young driver facing a high compulsory excess should weigh that before adding much voluntary excess.
Primary source: FCA: Insurance