Insurance Excess - What is an Insurance Excess?

Insurance excess, also known as a deductible, refers to the initial payment of the insured before an insurance company will process a claim against loss. That is, before an insurance company will process a claim, the insured will pay a certain agreed-upon amount. This is common with most types of short-term insurance as it serves to prevent insureds from making claims on small losses, as most excesses are larger than the small amount being claimed. For example, if a car is scratched and the damage amounts to R500, your insurance excess of R1 000 is more, so the insured will cover the cost himself instead of submitting a claim. This prevents the insurance company from becoming overwhelmed by small claims. 

Some companies do not set an insurance excess but make this a percentage of the claim amount. This means that smaller claims have smaller excesses and claims of total loss are high. While this does reduce the amount paid on monthly insurance premiums, it means the insured takes more risk on him- or herself. Other insurers fix the excess to avoid this, while others do not charge an excess at all.