You’ve just had a bingle, or maybe you’re comparing quotes, and one word keeps popping up on every policy document: excess. If you’re asking what is motor insurance excess, you’re not alone, and it’s one of the most misunderstood parts of any car insurance policy in Australia.
Put simply, motor insurance excess is the amount you pay out of your own pocket when you make a claim, before your insurer covers the rest. It’s not a fee, a fine, or a penalty. It’s a fixed contribution built into your policy from day one, and the amount can change depending on your age, your driving record, and even the type of vehicle you drive.
In this article, we’ll break down exactly how excess works when you lodge a claim, why insurers use it, and the different types you’ll come across, including basic, age, and voluntary excess. We’ll also show you how understanding your excess structure can help you avoid surprises and choose a policy that actually suits your budget and risk.
Why your excess choice affects your cover and premiums
Many drivers treat excess as a fixed number they can’t change, but that’s not how car insurance in Australia actually works. Your insurer lets you choose a higher or lower excess when you set up your policy, and that choice directly shapes what you pay every month and what you’re left covering after an accident. Get this balance wrong and you could end up with a policy that looks cheap on paper but leaves you scrambling for cash when you actually need to claim.
The trade-off between excess and premium
Insurers price risk. When you agree to a higher excess, you’re telling them you’ll absorb more of the cost yourself, so they lower your premium in return. Choose a lower excess, and you shift more risk onto the insurer, which pushes your premium up. This isn’t a marketing trick, it’s basic actuarial maths, and it applies to every provider in the market.
| Excess level | Typical premium effect | Best suited for |
|---|---|---|
| Low (e.g. $300) | Higher premium | Drivers who want cash certainty after a claim |
| Medium (e.g. $600-$800) | Moderate premium | Most private car owners |
| High (e.g. $1,000+) | Lower premium | Confident drivers with savings set aside |
Choosing your excess is really choosing how you want to spread risk between your bank account today and your bank account after a crash.
Why this decision matters more than most drivers realise
Setting your excess too low might feel safe, but it often means you’re overpaying for cover you’ll rarely use in full. Setting it too high can backfire badly if an at-fault accident happens and you don’t have the funds ready to release your car from the repairer. Somewhere in between sits the sweet spot, and it’s different for every driver depending on income, savings, and how often you’re actually on the road.
Australia’s insurance regulator, ASIC, through its Moneysmart service, notes that comparing excess options alongside premiums is one of the simplest ways to find genuine value rather than just the lowest headline price (https://moneysmart.gov.au/insurance). Reviewing both figures together, rather than fixating on the premium alone, gives you a much clearer picture of what a policy will actually cost you over its lifetime, especially if you’re the type of driver who claims more than once every few years.
How motor insurance excess works when you make a claim
When you lodge a claim, your excess gets deducted before any payout lands in your pocket, or you pay it directly to the repairer once the job’s done. Say your car needs $4,000 worth of panel work after a car park scrape, and your policy carries a $600 excess. Your insurer covers $3,400, and you cover the remaining $600, either upfront or when you collect your vehicle. It’s straightforward once you’ve seen it happen once, but plenty of drivers only discover this the hard way, mid-claim, when the repairer asks for payment.
The typical claims sequence
Most Australian insurers follow a similar process, though the exact order can shift slightly between providers.
- You report the incident and lodge your claim, usually online or by phone.
- The insurer assesses fault and confirms your policy covers the damage.
- You’re told your excess amount and when it’s due.
- Repairs go ahead, either through your own repairer or the insurer’s network.
- You pay the excess, either directly to the repairer or to the insurer, depending on their process.
The excess isn’t optional once you claim, it’s the price of admission for getting your insurer to cover the rest.
What happens if you’re not at fault
If another driver caused the damage and you can identify them, your insurer will often pursue their insurer to recover your excess, a process called subrogation. Fault determination matters enormously here, because a genuinely not-at-fault claim can mean you get your excess back entirely, while a disputed or shared-fault claim might leave you covering it yourself regardless of who you believe caused the crash.
The main types of excess in Australian car insurance
Australian insurers rarely charge just one excess. Most policies stack two or three types together, and knowing which ones apply to you can explain why your quote looks higher than a mate’s, even on the same car. Basic excess is the foundation every policy carries, but age excess, inexperienced driver excess, and voluntary excess can all sit on top of it depending on who’s behind the wheel.
Basic excess
Basic excess is the standard amount built into your policy from the start, set by the insurer based on your car’s value, your suburb, and your claims history. You don’t choose this figure directly, though it does shift slightly as insurers reprice risk each renewal.
Age and inexperienced driver excess
If a driver under 25, or one who’s held their licence for less than a set period, gets behind the wheel and has an accident, an additional excess usually applies on top of the basic amount. Insurers add this because younger and newer drivers statistically claim more often, so it’s a way of pricing that extra risk without penalising every driver on the policy.
Age and inexperience loadings exist because statistics, not assumptions, show younger drivers claim more often.
Voluntary excess
This is the portion you actively choose when setting up your policy, sitting on top of the basic excess. Increase it and your premium drops; decrease it and your premium rises.
| Excess type | Who it applies to | Can you change it? |
|---|---|---|
| Basic | Every policyholder | No, set by insurer |
| Age-based | Drivers under a set age | No, automatic loading |
| Inexperienced driver | Newly licensed drivers | No, automatic loading |
| Voluntary | Anyone at policy setup | Yes, you choose it |
Choosing the right excess amount for your situation
Picking the right excess isn’t about guessing, it’s about matching the number to your actual financial position. Motor insurance excess should sit at a level you could pay tomorrow if you had to, not a figure that sounds good on a quote but leaves you stuck when a repairer calls. Before you lock in a policy, work through your savings, your driving habits, and your car’s value together, rather than chasing the lowest premium in isolation.
Check your savings buffer first
Ask yourself honestly whether you could find $1,000 within a week if your car was written off tomorrow. If the answer’s no, a high voluntary excess probably isn’t worth the premium saving, no matter how tempting the quote looks.
Factor in how often you’re on the road
Rideshare drivers, tradies, and courier operators clock up far more kilometres than someone who drives to the shops twice a week, so their claim odds are higher. Frequent drivers often do better with a lower excess, since the maths of an occasional saving versus a real payout tips differently for them.
The right excess isn’t the cheapest one, it’s the one you can actually afford to pay on your worst day.
Match excess to your car’s value
Running an older car worth $8,000 with a $1,500 excess barely makes sense, since a total loss claim would leave little payout after deductions. Use this quick checklist before deciding:
- Could you pay this excess within seven days?
- Does your excess exceed 15-20% of your car’s value?
- Have you compared premium savings against worst-case out-of-pocket costs?
Getting this right protects your budget far more than chasing the lowest sticker price ever will.
When you don’t need to pay an excess
Excess isn’t automatic on every claim. Several situations exist where Australian insurers waive it entirely, and knowing these can save you hundreds of dollars if you’re paying attention before you sign anything.
Not-at-fault claims with a known third party
When you’re clearly not at fault and can name the other driver, most insurers won’t ask for an excess upfront, or they’ll refund it once they recover costs from the at-fault party’s insurer. This only works cleanly when there’s a witness, dashcam footage, or a police report backing your version of events. Fault determination is the deciding factor here, so grab evidence at the scene rather than relying on memory later.
No excess applies when the accident clearly wasn’t your fault and you can prove it.
Windscreen-only claims
Many comprehensive policies carry a separate, lower excess for glass damage, and some waive it completely if you’re only replacing a windscreen rather than making a full accident claim. Check your policy schedule specifically for this, since it’s often buried in the fine print rather than advertised upfront.
Optional extras and add-ons
Some insurers offer an excess-free option as a paid add-on, letting you avoid the cost entirely for an extra premium each year. Whether this makes sense depends on how often you actually claim:
- If you’ve claimed twice in five years, the add-on often pays for itself.
- If you rarely claim, you’re likely better off pocketing the saving instead.
Always confirm these exclusions in writing before you finalise cover, because verbal assurances from a call centre won’t hold up if a dispute arises later.
Making informed excess decisions
Understanding motor insurance excess comes down to one simple idea: it’s the price you agree to pay upfront in exchange for a lower premium, and getting that balance right protects your wallet on both ends. You now know how basic, voluntary, and age-based excess stack together, when insurers waive it entirely, and how to match the amount to your savings and driving habits rather than just chasing a cheap quote.
Don’t lock in a policy based on premium alone. Run the numbers on your excess against your actual bank balance, and revisit that choice every renewal, since your circumstances change even when your insurer’s default settings don’t. If you’re ready to compare cover that fits your budget properly, get a quote from National Cover and talk through your excess options with someone who’ll actually explain the trade-offs, not just sell you the lowest number.
