When choosing an insurer to cover your vehicle or home contents, there are various factors to consider depending on your unique profile. Regardless of who you are and what you drive there are certain standard tell-tale signs to look out for when choosing a quality, dependable insurer.

Sometimes cheaper monthly premiums could mean a very unpleasant and costly claims experience.

Shopping around for insurance could mean significant monthly savings. To help you pick a reliable insurer that meets your needs and budget, we're posting a series of articles on various topics and adding handy tips.

In Part 2 of the series we discuss excesses.

What exactly is an excess?

An excess, sometimes called "First amount payable", is an agreed amount of money that the insured is liable to pay in the event of an insurance claim been settled. I.e. if the excess on your car is R2 000, and the damages amount to R10 000; the insurance company will pay the remaining R8000 once the client (the insured) has paid the excess to the repairer. If the damages amount to less than the excess, the full cost of the damages will be for the account of the insured.

Why do insurers have excesses?

An excess is an effective tool as it minimises administratively expensive small claims and imposes a duty of care on the insured.

Generally there are three types of excesses:

• Standard excess – this is a compulsory excess which is either a fixed flat excess or a percentage excess linked to the value of your claim.
• Additional excess – if applicable this excess is payable over and above your standard excess. Typically an additional excess would apply when the driver is younger than 24 and not noted as the regular driver.
• Voluntary excess – your insurer may give you the option of a voluntary excess. Normally the insured would opt for a higher voluntary excess in exchange for a lower monthly premium, but at what cost?

• Can you afford the agreed excess should you need to claim? Don’t opt for a high excess if you don’t have disposable cash.
• In the case of percentage and additional excesses, do you know what amount of money these percentages translate into?
• Does the prospective insurer have multiple excesses linked to a single claim where for example they will charge you an excess on your vehicle and building in a situation where you crashed your vehicle into your own gate?

For more tips on choosing a reputable insurance, look out for the rest of the articles in this series: How to choose an insurer. Next topic: Claims – avoid the pain...

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