In most insurance policies issued in Australia there is a requirement for the insured party to bear the first part of any claim or loss. Generally, this has been translated into the “Excess”. Whilst the term tends to elicit the idea that it is the bit left over, the insurance policy excess is actually the first part of the claim. That means that if your loss or amount claimed is not more than the excess then you don’t have a claim.
Now in today’s world that doesn’t happen often, usually the amount being claimed exceeds the insurance policy excess, so everything works well, but that is not how it can go with a motor vehicle claim. Over the past 15 years retail (or domestic style) motor policies have drifted to a “no fault” excess model, where if you are not at fault for the accident and you can identify the other party your insurer will not charge you the excess.
This occurs because your insurer will recover the loss against the driver / or owner of the other car which would include your part, by not charging you the excess they actually reduce the administration required for the claim. However, it does require you to have a clear-cut case and if the other party disputes the accident description things can get a bit messy.
With vehicle excesses starting to top the $1000 mark in some policies, average claims which run at around $4500- $5000 per claim the excess can be 20% – 25% of the total claim, BUT when the claim is not at fault and your insurer doesn’t waive the insurance policy excess things will be different.
With the entry of low cost insurers and new commercial motor underwriters, the way to achieve these low costs is to ensure that they maximise the funds, which means collecting excesses. They typically don’t have a no fault excess regime, so you need to pay the excess in every case and then wait for a recovery (if ever). I have seen recovery take up to 2 years and if they seek legal action and the court allows for a repayment option, the period could be as long as 5 years. You will end up funding the third party that caused the accident and your insurer by paying a significant part of the claim.
So, when you select an insurer that offers a low cost solution, check the terms and conditions of the insurance policy and ask if they have a “no fault excess”, it just might save you some time and heartache at a time when all you want is for your car to be fixed.
