Insurance excess
| Insurance excess | |
| Subject | The amount a policyholder bears on a claim |
|---|---|
| Definition source | Policy wording |
| Relevance | One water escape can engage more than one excess |
| Not statutory | No legislative definition |
An excess is the amount a policyholder pays towards a claim before the insurer pays anything. Insurers define it in their own policy glossaries,[1] and there is no statutory definition, so what applies in any case is a question about that policy rather than about a general rule. It matters in water damage because a single escape of water can engage more than one excess at once.
More than one excess on one event[edit]
A concealed leak that damages a property can involve several distinct provisions: the escape of water peril covering the damage, a trace and access provision covering the cost of finding the leak and opening up to reach it, and, on some policies, buildings and contents cover treated separately.[1]
Each may carry its own excess and its own limit. A policyholder reading a single headline excess figure can therefore find that the amount they bear across the whole event is not that figure. Reading the provisions separately, rather than the policy summary, is the only way to establish what will actually be paid.
Compulsory and voluntary excess[edit]
Policies commonly distinguish a compulsory excess, set by the insurer, from a voluntary excess the policyholder elects in exchange for a lower premium. The two are added together on a claim.[1] A voluntary excess chosen when a policy was cheap is easily forgotten by the time a claim is made.
Some perils carry their own higher excess. Subsidence is the common example, and escape of water is treated as a distinct peril on many policies, so a water claim may not attract the same excess as, say, a theft claim on the same policy.[1]
Why it interacts with detection[edit]
Where a leak is found early and the damage is limited, the cost of putting it right can fall below the excess, in which case there is no claim to make and the whole cost sits with the policyholder. Where it is found late, the damage is larger and a claim becomes worthwhile, but the question of whether the damage occurred gradually then arises, and some policies limit or exclude gradual damage.[1]
The practical consequence is that the excess is one of the reasons early detection matters beyond the water saved: it changes whether the event is a claim at all.