Excess vs premium

Direct answer

What matters more — the premium or the excess? They are one trade-off. The premium is the price you pay to keep the promise in force. The excess is the first-loss you usually fund when that promise is called. A lower premium that was created by a higher, stacked, or event-specific excess is not a bargain until you can pay those excesses on the day of the claim.

This page is general information. It is not a quote, personal advice, or a recommendation of any insurer. Eligibility, excess amounts and stacking rules sit in the Product Disclosure Statement and the schedule you are given.

The diagram is illustrative. It does not show live prices or a ranked product.

What an excess actually is

An excess is a contractual first-loss. In most general-insurance wordings, you contribute a stated amount (or, occasionally, a percentage) toward a payable claim. The insurer’s payment is then the remainder, up to the limit, after exclusions and other conditions.

That is different from a premium. A premium is due whether or not you claim. An excess is usually due because you claimed — or because the wording treats a particular event as attracting one.

People talk as if “the excess” were a single field on a quote form. It is often a family of amounts that can apply together. The large number on a comparison tile is commonly the standard or basic excess, or a voluntary extra you ticked to move the premium. It is rarely a promise that nothing else will be added.

Read the PDS section headed excess, deductible, or contribution. Then read the schedule. If they disagree, the personalised schedule and any endorsement usually control the numbers that apply to you — but only for the product you actually bought.

Types of excess you should line up

Names vary. Marketing pages invent friendlier labels. Use the PDS language, then put a row on your sheet for each type that could fire on the same event.

None of those rows contains a price we invented. Fill amounts from the documents in front of you.

Excesses stack — one number is rarely the whole bill

Stacking is the claim-day surprise. A quote that prints a single excess figure can still add another amount when the person driving is 20, or newly licensed, or both. A home wording can pair a standard excess with a higher cyclone or flood excess. A contents claim for a portable item may have its own contribution.

Work the ugly sum before you rank premiums:

1. Write the event you actually fear (at-fault smash with a young driver; storm damage to a roof; theft of a listed bicycle).
2. List every excess the PDS says can apply to that event.
3. Add them. That total is the cash you must be able to fund, not the number in the tile.
4. Only then look at the premium you were quoted for that configuration.

If you cannot fund the stack without selling something, the cheap premium is not cheap. It is a loan you have not arranged. See what affects premiums for the other levers that move the annual price, and the quotes checklist for the questions that belong on the same sheet.

How the premium side of the trade-off works

Insurers price the residual risk they keep after your first-loss. All else equal, a higher excess should reduce the premium, because small claims stay with you and the insurer’s expected payout falls. All else is rarely equal.

• Two quotes with different listed drivers are not “the same product with a different excess”.
• A voluntary excess that disables a windscreen extra is a different product.
• An imposed excess after a claims history is not a consumer “choice” in the same sense as a slider on a website.
• Some products already sit at a floor or ceiling. Sliding further may change nothing.

The honest experiment is two quotes, same insurer or same comparison path, that differ only by the excess election. Keep every other answer frozen. Read both schedules. If the cheaper one also dropped a benefit, you did not isolate the trade-off.

We will not tell you how many dollars of premium you “should” save per extra hundred dollars of excess. That ratio is not a public constant. It depends on the product, the risk, and the day.

Car, home and health — the same idea, different machinery

Car. Comprehensive products are where stacking is most visible to households. Age and inexperienced-driver excesses, glass excesses, and undeclared-driver rules belong in the comparison before you open car insurance as a price race. Third party property is a thinner layer; do not compare its premium to comprehensive and call it a win.

Home and contents. The first-loss may look modest until an event-specific excess applies, or until a percentage excess is calculated on a large rebuild. Underinsurance is a separate disaster — a low sum insured can leave you funding the gap and an excess. Read underinsurance and the home insurance hub before you treat a low premium as proof the building is cheap to replace.

Health, pet, income protection. These products more often use waiting periods and benefit percentages than a classic motor-style excess, but the cash-flow idea is the same: you keep a slice of the cost. Waiting periods are the time version of an excess. Do not mix a hospital product with a long wait into a “cheaper than extras” story. The health insurance type page is the comparison hub for hospital versus extras.

Choosing a fundable excess — a method, not a number

There is no universally correct excess. There is a fundable one.

Write four lines:

1. Cash you can access in five days without a fire sale — offset account, redraw you are allowed to use, a dedicated buffer. Not the limit on a credit card you would struggle to repay.
2. The stacked total for the event you named.
3. How often you expect to claim. Frequent, small events (windscreen, minor storm) punish a high excess. Rare, large events (write-off, house fire) can tolerate a higher first-loss if the limit is adequate.
4. Who else is on the policy. A household that adds a P-plater next month is not looking at the same stack as a two-adult, listed-driver arrangement.

If line 2 exceeds line 1, raise the premium side of the trade-off — or change the product — rather than hoping you will not claim. Hope is not a deductible.

Optional extras that “waive” an excess for a named event are extra products. Adding a waiver to one quote and not the other makes the premiums incomparable. Decide from the event, not from a checkbox binge.

Application answers that fake a low excess

A cheaper path that depends on an incomplete driver list, a private-use answer on a car that earns money, or a rebuild figure you guessed, is not a comparison win. Australians have a duty to take reasonable care not to make a misrepresentation. A claims team can use those answers to decline or reduce a claim — at which point the excess debate is academic.

If something was typed to win a slider position, fix it before you need the policy. Cheap that depends on an inaccurate answer is not a method. It is a future argument.

What this site will not do with excesses

• Invent a typical comprehensive excess for a capital-city hatch.
• Rank insurers by “lowest excess” or “best excess options”.
• Tell you a dollar amount you should elect.
• Treat a partner tile as evidence. Any future commercial path is a stub at Compare offers until a real partner is contracted.

For official education, use MoneySmart’s insurance pages. For a complaint that has finished the insurer’s internal process, AFCA is the usual external forum for many general-insurance disputes. Neither link is a reason to buy a particular product.

Does a higher excess always lower the premium?

Does a higher excess always lower the premium? Often, not always, and never by a figure this site will invent. Insurers price the residual risk they keep after your first-loss. All else equal, electing a larger voluntary excess should reduce the invoice because small claims stay with you. All else is rarely equal, and “should” is not a public constant.

Three failures hide inside the slogan.

You are already at the ceiling. Some products have a maximum voluntary excess. Another tick on a website may change nothing. The schedule is the evidence, not the slider animation.

The quote did not isolate the lever. A path that raises excess and unticks windscreen, hire car, portable cover, or flood is a different product. The cheaper invoice is then a thinner promise plus a larger first-loss. That is not an excess experiment. Ask for two quotes that differ only by the voluntary excess. Keep listed people, use, layer, valuation and extras frozen. Read both schedules. If a benefit disappeared, write “different product” and stop calling it a saving.

Another excess still sits on top. Age, inexperienced-driver, event-specific, glass and imposed amounts can add on the same claim. A higher voluntary excess can lower the premium and still leave a stack you cannot fund. Car households meet this most clearly: a P-plater’s at-fault smash is not “the tile figure”. It is the tile figure plus the tables in the PDS. See car insurance cost for the layer and valuation rows that must stay frozen while you run the experiment.

Legal lowering of a premium by excess is a how to lower premiums lever, not a hack. If you cannot fund the stacked total in cash, you moved the cost to a day you hope will not arrive.

We will not publish a rule of thumb for premium saved per extra excess. That ratio is not a public constant. Fill both columns from quotes you were given.

Which saves money — excess or premium?

Which saves money — the excess or the premium? Neither word wins on its own. They are a split of when you pay.

The premium is the cash you pay to keep the promise in force, whether or not you claim. A lower premium saves money in years the event does not happen — if the cover rows still match. A lower premium created by a thinner layer, a missing driver, a lower sum, or a longer wait is a different product.

The excess is the cash you usually fund because you claimed. A higher excess “saves” only in the years you do not claim, and only to the extent the premium actually fell. In the year you do claim, you pay the stacked first-loss. Frequent, small events (windscreen, minor storm, a portable theft) punish a high excess. Rare, large events (write-off, house fire) can tolerate a higher first-loss if the limit is adequate and the stack is fundable.

The comparison that answers “which saves money” is therefore not a slogan. It is four lines on a sheet:

1. The event you actually fear, not a category name.
2. The stacked excess that event attracts on each quote.
3. The premium you were quoted for that exact configuration.
4. Whether you can fund line 2 without selling something.

If two columns match on cover and differ only on how that split is drawn, you may prefer the lower invoice or the lower first-loss. That is a household cash-flow choice. It is not a ranking we will publish, and it is not a reason to invent a break-even year.

If the columns do not match, stop asking which saves money. Ask which product you are buying. The what affects premiums spoke is the factor list; this page is the first-loss machinery.

Optional extras that waive an excess for a named event belong on line 2 and line 3 together. Adding a waiver to one quote and not the other makes “which saves money” unanswerable.

After you pick a number

Read the schedule the day it arrives. Confirm every excess that is printed, including specials and percentages. Diary the cooling-off window if the PDS offers one and you have not claimed.

If you later add a driver, change use, or raise the sum insured, ask whether the excess stack changed. Premium is not the only field that moves mid-term.

Return to how to compare and put excess in the mechanics block, not in the last column. Price comes after the rows match. Our methodology explains why we refuse to publish a “cheapest this month” table that hides the first-loss. The disclaimer is the legal version of the same sentence: this is general information, and the PDS wins.