A guide to car insurance excess

In this guide, we explain car insurance excess, the different types of excess, and when it applies. Whether you’re making a claim or comparing policies in Melbourne, understanding excess is essential to managing your costs and coverage.

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What is car insurance excess?

A car insurance excess is an amount you must pay on top of your premium when making a claim. It’s a fixed out-of-pocket cost that applies when you lodge a claim against your insurance policy.

For example, if you're involved in a car accident and submit a claim for $4,000 in damage, and your policy has an excess of $800, you would pay the $800, and your insurer would cover the remaining $3,200.

• Insurance providers include an excess to help keep insurance premiums lower by offsetting the administrative costs of processing claims.
• Car insurance excesses also act as a deterrent, discouraging policyholders from making claims for small accidents or lodging frequent claims.

While nearly all insurers include an excess, the amount and type of excess can vary significantly between companies. It’s always worth comparing policies to shop around for the lowest possible excess that still provides the coverage you need.

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When do you pay car insurance excess?

You usually pay your car insurance excess when your claim is approved and your vehicle goes in for repairs. Depending on your insurer, the excess may be:

• Paid directly to your insurer when you make the claim
• Deducted from the total repair payout
• Paid to the repairer before work begins

In at-fault accidents, excess is almost always payable. However, your insurer might waive the excess if you're not at fault and the other driver is identified and insured.

If you are confused, check your Product Disclosure Statement (PDS) or contact your insurer directly. They will confirm exactly when and how your excess must be paid.

How do I know who is at fault in an accident?

If you're not at fault — that is, you didn’t cause the accident — you’ll likely avoid paying an insurance excess. But how do you determine who was responsible?

In some cases, fault is clear-cut. Examples of the other driver being at fault include:

• You’re stopped at a red light, and someone hits your car from behind.
• You have the right of way, and another driver fails to give way and crashes into you.

In other situations, fault may be shared or unclear.

For example:

• Two vehicles attempt to merge into the same lane at the same time.
• Both drivers are reversing and collide in a car park.

If there’s any doubt about who’s at fault, avoid admitting liability. Your insurer or the police will review the accident details and determine who is liable. This assessment impacts whether you’ll need to pay your car insurance excess, and who ultimately covers the repair costs.

What happens if both drivers are at fault?

In some accidents, both drivers may share responsibility. This is known as shared liability or contributory negligence, and it’s more common than you might think, especially in merge lane collisions, multi-vehicle pileups, or car park accidents.

If both drivers are found partially at fault:

• Each party may need to pay their own car insurance excess.
• Insurers may split the cost of the total damage, depending on the fault percentage.
• Premiums may still increase for both drivers, even if the fault was shared.

In these cases, having clear evidence of the accident — like dashcam footage or witness statements — can help your insurer determine your level of responsibility and whether excess applies.

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What are the different types of car insurance excess? 

Car insurance excess is a way for the insurance provider to avoid risk by passing on some of the costs of repairs to the driver. Due to the different nature of risks, there are a number of different excesses payable, depending on how 'risky' you are as a driver.

1. Standard insurance excess

This is the basic excess most drivers will need to pay when making a claim, regardless of who was driving or what happened. The amount is usually chosen when you first take out or renew your policy. In most cases, it applies to both at-fault and not-at-fault accidents where the other driver can’t be identified.

2. Voluntary excess

This is an optional excess you can choose to add when setting up your policy. Increasing your voluntary excess usually reduces your premium, but you’ll pay more upfront if you need to make a claim. Confidential drivers often use it to lower their regular insurance costs.

3. Age excess

If you are under the age of 25, you will likely have a higher excess. This is because younger drivers are more likely to be involved in an accident. Your excess may be upwards of $1,000, so it is worth looking around between insurers to find the best possible rate.

4. Inexperienced driver excess

This excess applies when the driver has held their licence for less than a set period (typically less than two years), regardless of age. Even a fully licensed 30-year-old could be charged an inexperienced driver excess if they’re newly licensed.

5. Glass and windscreen excess

Some insurers apply a separate glass or windscreen excess when your claim only relates to damage to windows or windscreens. This excess is usually lower than your standard excess and is designed for stone chips, cracks, or shattered glass.

In many policies, you can add windscreen cover that waives the excess entirely for these repairs, which can be worth considering if you regularly drive on highways or rural roads.

6. Unlisted driver excess

An unlisted driver excess may apply if the driver involved in the accident wasn’t listed on your insurance policy. Some insurers are stricter about this than others, so always check your Product Disclosure Statement (PDS) when adding new drivers to your cover.

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Can I avoid paying car insurance excess?

While car insurance excess is typically required when making a claim, there are certain situations where you may not have to pay it in full, or at all.

You may be able to avoid paying excess if:

• You choose a policy with a higher premium and no excess.
• You're not at fault and can provide the at-fault driver's full name, address, and registration number.
• You're experiencing financial hardship and provide evidence to your insurer to support a request for waiver.

It's important to note that many Australians may not fully understand the specifics of their car insurance policies. A recent survey by Youi Insurance revealed that while 83% of Australians feel confident about their policy knowledge, only 25% have read their Product Disclosure Statement (PDS) in full—the document that outlines key policy terms, coverage limits, and exclusions. 

At Sheen, we strive to make accident repairs and panel beating as straightforward as possible. We can liaise with your insurer, help you understand your excess obligations, and get you back on the road promptly, without the added stress of navigating complex paperwork.

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