Voluntary excess is the amount a policyholder chooses to add on top of the compulsory excess when buying insurance. Agreeing to pay more towards any future claim usually lowers the premium, because the customer absorbs a larger share of each loss.
In one line: Voluntary excess is the extra claim contribution a customer opts into to reduce the premium.
How voluntary excess works
When taking out a policy, the customer selects a voluntary excess that is added to the insurer's compulsory excess. The higher the voluntary figure, the lower the premium tends to be, because the insurer expects to pay less per claim.
On a policy with a 250 GBP compulsory excess, choosing a 250 GBP voluntary excess makes the total payable on a claim 500 GBP. If that choice cuts the premium from 700 GBP to 620 GBP, it saves 80 GBP a year.
The trade-off matters at claim time, because a high total excess can make small claims not worth pursuing.
Voluntary excess vs compulsory excess
Compulsory excess is fixed by the insurer and cannot be changed. Voluntary excess is chosen by the customer and added on top, so the two combine into the total paid on any claim.
Setting a high voluntary excess only to cut the premium can backfire if the eventual claim is small, since the excess may exceed the repair cost.
Primary source: FCA: Insurance
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