How Does Car Insurance Excess Work? Everything You Need to Know
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How Does Car Insurance Excess Work? Everything You Need to Know
A car insurance excess, also known as a deductible, is the portion of any claim the policyholder must pay out of pocket before the insurer covers the rest. The insurance policy specifies a fixed excess amount, and the insurer applies it to every claim on the policy.
This mechanism ensures that the policyholder shares in the cost of claims, which discourages small or frivolous claims and helps keep premiums affordable for everyone. In practice, choosing a higher excess usually lowers the insurance premium, while a lower excess raises the premium.
How Does a Deductible (Excess) Work When Filing a Claim?
When a policyholder files a car insurance claim for damage or loss, the deductible (excess) directly affects how the insurer determines the payout. The following steps demonstrate how a typical auto insurance claim works with a deductible.
Step 1: Reporting the Claim
After an incident, the policyholder notifies the insurance company and files a claim as soon as possible. Policies require prompt reporting, allowing the insurer to begin the claims process immediately. The policyholder provides details of the event (what happened, when, where, and who was involved) so the insurer can open a claim and advise on next steps.
Step 2: Damage Assessment
An insurance adjuster inspects the vehicle to determine the extent of damage and estimate repair costs, while also reviewing the policy to confirm coverage. The insurer then calculates the repair amount it approves and notes how the deductible will affect the final payout—essentially earmarking the portion the policyholder must cover.
Step 3: Excess (Deductible) Applied
Once the insurer approves the claim, it subtracts the deductible from the claim total, leaving the policyholder to cover that portion out of pocket. For example, if the repairs cost $2,000 and the policy’s deductible is $500, the policyholder pays $500 as their share of the claim.
Step 4: Insurance Payout
After accounting for the deductible, the insurance company covers the remaining approved costs of the claim. Continuing the above example, once the policyholder pays the $500 excess, the insurer pays the remaining $1,500 to cover the repair bill. Importantly, if the total damage amount falls below the deductible, the insurer pays no benefit and the policyholder bears the full cost of the repairs.
Car Insurance Excess Explained: What Drivers Need to Know
Understanding how car insurance excess functions requires looking at broader reforms that shape a driver’s financial responsibility for both compliance costs and claims.
1. Extended Validity of Certificates
A new amendment, the Road Traffic Amendment Act (2025), has extended the validity of vehicle certifications:
- Brand-new cars get a five-year fitness certificate.
- Used cars up to 10 years old get a three-year certificate.
- Vehicles older than 10 years continue yearly renewals
For the registration licence, the usual six-month and one-year options remain, and motorists can now opt for a two-year registration period as well.
Longer validity means drivers pay renewal fees less often, which cuts down on frequent out-of-pocket costs. This parallels how adjusting an insurance excess lets a driver trade off paying more personally in the event of a claim versus paying more in premium.
2. Digitalization & Elimination of Physical Decals
The motor vehicle certification system now operates fully digitally. Authorities issue fitness and registration certificates electronically via a secure online portal, and motorists can download PDF copies if needed. Drivers no longer display windshield decals or carry paper certificates—the system stores all records digitally and sends e-mail notifications when it generates new e-certificates.
Authorized parties like the police and insurance providers can verify a vehicle’s certification status online. This upgrade also speeds up insurance matters: insurers can instantly verify documents online and avoid delays or disputes in claims when an excess applies.
3. Removal of Paper Certificate Requirement
The law no longer considers it an offense if a driver lacks the physical fitness or registration certificate. This amendment removes the requirement to carry these documents, so police cannot ticket motorists just for missing papers.
Now that officers and insurers can verify certification digitally, drivers no longer present physical copies. This cut in paperwork also reduces the chance of delays in insurance claims over documentation issues. Insurers can instantly confirm compliance online and handle any claim excess without administrative hassle.
4. Launch Date & Technological Upgrade
Authorities launched the new digital platform on July 21, 2025, marking the start of full implementation. This rollout forms part of the government’s broader SPEED programme (“Streamlining Processes for Efficiency and Economic Development”), which aims to use technology to improve service efficiency. Upgrading to a modern system reduces waiting times and errors in managing vehicle records.
Similarly, having a clearly defined insurance excess upfront helps speed up claim payouts by removing uncertainty. Both the tech upgrade and the excess model streamline processes by clarifying responsibilities and reducing delays.
5. Key Takeaway for Motorists
Car insurance excess is the portion of any claim a policyholder must pay from their own pocket before the insurer covers the rest. Choosing a higher excess lowers the premium but requires the driver to pay more out of pocket if an accident happens, whereas a lower excess has the opposite effect.
The recent traffic law amendments similarly clarify drivers’ responsibilities: by extending certificate validity and digitizing records, these changes reduce compliance costs and paperwork for motorists. In both cases, drivers clearly understand which costs or duties they handle themselves versus what the insurer or system manages.
Change | Old system | New system |
Fitness certificate validity | 1 year (annual renewal for all vehicles) | 5 years (brand-new vehicles); 3 years (used vehicles ≤10 years old); 1 year (vehicles >10 years) |
Registration validity | 6-month or 1-year registration period | Choice of 6-month, 1-year, or 2-year registration period (up to 2 years max) |
Documentation & decals | Paper fitness certificate and windshield decal required (had to be carried/displayed) | Records fully digital; certificates issued electronically (no physical document or decal needed) |
Legal obligation at stops | Drivers were required to carry and display these documents; failing to produce them was an offense | No requirement to carry physical certificates; no penalty if documents are not presented (status verified digitally) |
Situations Where You Don’t Pay a Deductible
You will not pay your car insurance deductible (excess) in a few situations. One common example is when another driver causes an accident and their liability insurance covers all your damages. In that case, you do not pay your deductible because the at-fault driver’s insurer pays for your repairs.
You also do not pay a deductible for claims under your own liability coverage, since liability insurance (which covers damage you cause to others) typically includes no deductible at all.
In addition, some policies waive the excess for specific small claims—for instance, minor windshield glass repairs often come covered without requiring you to pay the excess out of pocket. These exceptions ensure that you pay a deductible only when it truly applies to your own covered losses.
What Happens If You File More Than One Claim—Do You Pay a Deductible Each Time?
In general, yes—car insurance requires you to pay your chosen excess for each new claim. Auto insurance does not use a single annual deductible, so every separate incident triggers its own out-of-pocket payment.
In practice, if you file two claims for two unrelated accidents, you pay the excess twice, once per claim. Unless your policy includes a special waiver provision, each claim carries its own deductible charge.
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