What Is Insurance Excess, and How Does It Affect Your Claim?
You have paid your insurance premium, kept your policy active and submitted all the required claim documents. However, when the claim is approved, you are informed that you must contribute part of the repair or replacement cost.
That contribution is commonly known as insurance excess.
Insurance excess is one of the most important parts of an insurance policy, yet many policyholders only learn about it when making a claim. Understanding it before purchasing or renewing your cover can help you avoid unexpected costs and choose a policy that suits your financial situation.
What Is Insurance Excess?
Insurance excess is the amount of money that the policyholder is required to pay towards an approved claim before the insurance company settles the remaining amount.
The Association of Kenya Insurers describes excess as the amount the insured pays when making a claim. The Insurance Regulatory Authority’s standard policy wording also describes it as the first portion of a claim that the insured must bear.
In simple terms, the insurer does not necessarily pay the entire cost of every loss. You and the insurer share the cost according to the excess stated in your policy schedule.
A Simple Example
Suppose your vehicle is involved in an accident and the approved repair cost is KSh 150,000.
Your policy has an excess of KSh 25,000.
The claim would generally be handled as follows:
- You pay: KSh 25,000
- The insurer pays: KSh 125,000
The insurer may deduct the excess from the final settlement or require you to pay it directly to the repairer, depending on the insurer’s claims process.
Is Insurance Excess the Same as a Premium?
No. A premium and an excess are two different costs.
Insurance premium
The premium is the amount you pay to purchase and maintain your insurance cover. It may be paid annually, monthly, quarterly or through another arrangement agreed with the insurer.
You pay the premium whether or not you make a claim.
Insurance excess
The excess is the amount you may be required to contribute when an insured loss occurs and you make a claim.
Therefore:
- The premium pays for the insurance cover.
- The excess is your contribution towards a particular claim.
Paying your premium does not automatically remove the excess unless your policy specifically provides an excess waiver, excess protector or similar benefit.
Why Do Insurance Companies Charge an Excess?
Insurance excess is not simply an additional fee added after a loss. It serves several practical purposes.
1. It encourages shared responsibility
Insurance transfers a significant part of your financial risk to an insurer, but the excess means you retain a small portion of that risk.
This encourages policyholders to take reasonable precautions to prevent avoidable losses.
2. It reduces very small claims
Without an excess, policyholders could submit claims for every minor scratch, small repair or low-value loss.
Processing these small claims would increase administrative costs for insurers and could eventually contribute to higher premiums.
3. It can help manage insurance premiums
In some policies, selecting a higher voluntary excess may result in a lower premium because you are agreeing to carry a larger part of any future claim.
However, a cheaper premium is not always the best choice. You must be financially prepared to pay the higher excess if a claim occurs.
4. It helps control repeated claims
An excess can discourage frequent claims for minor incidents and allow insurance to focus on losses that would have a more serious financial impact on the policyholder.
How Is Insurance Excess Calculated?
The method used to calculate excess depends on the insurer, the type of insurance, the insured risk and the wording in your policy schedule.
An excess may be expressed as:
A fixed amount
The policy may state that you must pay a specific amount for each claim.
For example:
KSh 20,000 for each and every claim.
If the approved loss is KSh 100,000, you contribute KSh 20,000 and the insurer settles the remaining KSh 80,000, subject to the policy terms.
A percentage of the claim
The excess may be calculated as a percentage of the approved claim amount.
For example, if your excess is 10% and the approved claim is KSh 200,000:
- Your contribution would be KSh 20,000.
- The insurer would settle KSh 180,000.
A percentage of the insured value
Some policies, especially motor policies, may calculate the excess as a percentage of the vehicle’s value or sum insured rather than the repair cost.
The policy may also include a minimum or maximum amount.
For instance, an excess may be described as:
2.5% of the vehicle’s value, subject to a minimum amount.
The exact calculation must always be confirmed from the policy schedule. The IRA’s private motor policy schedule, for example, provides spaces for excess amounts and may express own-damage excess as a percentage of the vehicle’s estimated value, subject to stated limits.
What Happens When the Loss Is Less Than the Excess?
When the cost of the loss is lower than the applicable excess, the insurer will generally not make a payment.
For example:
- Cost of repair: KSh 12,000
- Policy excess: KSh 20,000
Since the repair cost is below the excess, the policyholder would normally pay the entire KSh 12,000.
Submitting a claim may not be financially useful in such a situation. However, you may still be required to notify your insurer or broker about the incident, especially where a third party is involved.
Failure to report an accident promptly could affect a later claim if the damage or liability becomes more serious than initially expected.
Common Types of Insurance Excess
The type and number of excesses that apply will depend on the policy. Some of the most common include the following.
1. Standard or Basic Excess
This is the ordinary excess stated in the policy schedule. It normally applies whenever you make a claim under the relevant section of the policy.
It may be a fixed amount or a percentage.
2. Compulsory Excess
A compulsory excess is determined by the insurer and forms part of the policy terms.
The policyholder does not normally choose whether it applies. It may be based on factors such as:
- The type of property or vehicle
- The nature of the risk
- The insured person’s claims history
- The driver’s age or experience
- The location of the insured property
- The type of use
- The value of the insured item
3. Voluntary Excess
A voluntary excess is an additional amount that the policyholder agrees to pay on top of the compulsory excess.
Choosing a voluntary excess may help reduce the premium, but it increases the amount you must pay when claiming.
For example:
- Compulsory excess: KSh 20,000
- Voluntary excess: KSh 15,000
- Total contribution when claiming: KSh 35,000
Before accepting a voluntary excess, consider whether you could comfortably raise the full amount after an unexpected loss.
4. Young or Inexperienced Driver Excess
Some motor insurance policies may apply an additional excess when the vehicle is being driven by a person below a specified age or by someone who has held a driving licence for less than a stated period.
This additional excess may apply together with the standard excess.
The exact age, driving experience and amount will vary between insurers and policies.
5. Theft Excess
A separate or higher excess may apply when a vehicle or insured property is stolen.
Insurers may also require the policyholder to demonstrate that reasonable security measures were in place and that the theft was reported to the police promptly.
6. Windscreen or Glass Excess
Some policies provide windscreen or glass cover subject to a separate excess or claim limit.
In other cases, windscreen claims may be covered without affecting the main motor excess, provided the loss falls within the specified windscreen limit.
The policy schedule should state the applicable arrangement.
7. Additional Excess for Particular Uses
A vehicle used for private purposes may attract different terms from one used for commercial transport, ride-hailing, deliveries or other business activities.
Using an insured vehicle for a purpose that was not disclosed to the insurer may result in an additional excess, reduced settlement or rejection of the claim.
Always inform your broker when the use of your vehicle changes.
Can More Than One Excess Apply to the Same Claim?
Yes.
Depending on the policy terms, more than one excess may apply to one incident.
For example, a young driver may be involved in an accident while driving a vehicle with both a standard excess and a young-driver excess.
The claim may be subject to:
- The standard policy excess
- The young-driver excess
- Any voluntary excess selected by the policyholder
This is why it is important to ask whether excesses are applied separately or cumulatively.
Do not assume that the amount shown under “basic excess” is the maximum amount you could contribute.
Does Excess Apply to Every Insurance Policy?
Not necessarily.
Excess is common in general insurance policies, including:
- Comprehensive motor insurance
- Domestic package insurance
- Property insurance
- Fire and special perils insurance
- Burglary insurance
- Marine insurance
- Goods-in-transit insurance
- Travel insurance
- Medical insurance
- Electronic equipment insurance
- Contractors’ all-risks insurance
However, the nature of the excess differs.
In medical insurance, a similar arrangement may be described as a co-payment, co-insurance or deductible. In property insurance, the policyholder may bear the first stated amount of every loss. The IRA’s standard domestic package wording, for example, includes sections where the insured bears the first stated amount of a loss.
Life insurance policies generally do not operate in the same way because they pay an agreed benefit when the insured event occurs, subject to the policy terms.
Does Excess Apply to Third-Party Motor Claims?
The answer depends on the type of claim and the policy wording.
Under comprehensive motor insurance, excess commonly applies to damage to your own vehicle. Different terms may apply to third-party liability claims.
Where another person was clearly responsible for the accident, your insurer may attempt to recover the claim amount from the responsible person or their insurer. In some situations, a recoverable excess may be refunded after successful recovery.
However, this is not automatic. Recovery can depend on:
- Evidence showing who caused the accident
- Police documentation
- Witness statements
- Availability of the responsible party
- Whether the other vehicle was insured
- Cooperation from the other insurer
- The terms of your own policy
Ask your broker whether your excess may be recoverable and what evidence you need to preserve.
Can an Insurance Excess Be Waived?
Some insurers offer an excess waiver, excess protector or excess buy-back benefit.
This may allow the insurer to reduce or remove certain excesses in exchange for an additional premium.
However, an excess waiver may not cover every type of excess. It may exclude excesses connected to:
- Young or inexperienced drivers
- Theft
- Undeclared drivers
- Commercial use
- Specific high-risk activities
- Voluntary excesses
- Breach of policy conditions
Read the benefit terms carefully before assuming that you will pay nothing when making a claim.
Does Paying an Excess Guarantee That the Claim Will Be Settled?
No.
The excess only becomes relevant after the insurer confirms that the loss is covered under the policy.
A claim can still be declined if:
- The cause of the loss is excluded
- The policy had expired
- Premiums had not been paid as required
- Important information was not disclosed
- The insured item was being used for an undeclared purpose
- The claim was fraudulent
- The policyholder failed to take reasonable precautions
- Required documents were not provided
- The incident was reported too late
- The person driving the vehicle was not authorised or properly licensed
Paying or being willing to pay the excess does not turn an excluded event into an insured event.
Important Questions to Ask About Excess
Before buying or renewing an insurance policy, ask your insurer or broker:
- What is the basic excess?
- Is it a fixed amount or a percentage?
- Is the percentage based on the claim amount or the insured value?
- Is there a minimum or maximum excess?
- Does the excess apply to every claim?
- Are there additional excesses?
- Can more than one excess apply to the same incident?
- Is there a young-driver or inexperienced-driver excess?
- Is there a separate theft excess?
- Does a windscreen claim attract an excess?
- Can I purchase an excess waiver?
- Can my excess be recovered if another person caused the accident?
- Will choosing a voluntary excess reduce my premium?
- How will the excess be paid during the claims process?
These questions can help you compare policies based on the total cost of protection rather than the premium alone.
Do Not Choose Insurance Based on Premium Alone
A policy with the lowest premium may not always provide the best value.
It may have:
- A higher excess
- More exclusions
- Lower claim limits
- Narrower benefits
- Additional conditions
- Limited repair options
- Higher contributions for certain claims
For example, Policy A may cost KSh 5,000 less per year but carry an excess that is KSh 30,000 higher than Policy B.
The small premium saving may become costly when an accident occurs.
The goal should be to find a reasonable balance between:
- An affordable premium
- A manageable excess
- Adequate cover
- Clear policy terms
- Reliable claims assistance
How an Insurance Broker Can Help
An insurance broker represents the customer in identifying suitable insurance options. Brokers compare coverage, conditions and pricing and can also assist clients during the claims process.
At First Accord Insurance Brokers, we help you understand more than the quoted premium.
We can help you:
- Compare excess amounts across different insurers
- Understand compulsory and voluntary excesses
- Identify additional excesses hidden within policy schedules
- Select cover that matches your risk and budget
- Understand policy exclusions and claim conditions
- Prepare and submit the required claim documents
- Follow up on the progress of your claim
- Clarify how the final settlement has been calculated
Insurance should not become clear only after a loss. You deserve to understand what you are buying before signing the policy.
Final Thoughts
Insurance excess is the portion of an insured claim that you agree to pay.
It is not the same as a premium, and it does not mean that the insurer has refused to honour the claim. It is a cost-sharing arrangement stated in the policy.
Before purchasing or renewing insurance, confirm:
- The amount of the excess
- How it is calculated
- The circumstances in which it applies
- Whether additional excesses may apply
- Whether an excess waiver is available
- Whether you can comfortably afford the contribution
Most importantly, read your policy schedule and ask for clarification whenever a term is unclear. The Association of Kenya Insurers advises consumers to read and understand their policy documents and contact their insurer, agent or broker about unclear areas.
Need Help Understanding Your Insurance Policy?
Talk to First Accord Insurance Brokers before purchasing, renewing or claiming on your insurance.
We will help you understand the premium, excess, benefits, exclusions and claims process so that you can make an informed decision.
First Accord Insurance Brokers — helping you understand your cover before you need to claim.
Disclaimer: This article provides general information and does not replace the specific terms, conditions, limits and exclusions contained in an insurance policy. Excess amounts and claims procedures vary depending on the insurer and type of cover.