Written by licensed insurance agent Alex Huber
If you have chosen a voluntary excess (often called a “deductible” in the USA) when setting up your policy, yes, you must pay it every time you make an “at-fault” claim or a claim where a third party cannot be held responsible.
Voluntary excess is an additional amount you agree to pay out of pocket on top of the compulsory excess set by your insurance provider. For example, if your insurer sets a compulsory excess of $500 and you choose a voluntary excess of $250, your “total excess” is $750. If you get into an accident and file a claim for $3,000 in damages, you will pay the first $750, and the insurance company will cover the remaining $2,250.
The key thing to remember is that while you don’t have to select a voluntary excess when buying your policy you can often set it to $0 once it is written into your policy agreement, it becomes a legally binding part of your contract. You cannot waive it at the time of a claim just because money is tight.
Understanding the Difference: Compulsory vs. Voluntary Excess
To manage your insurance costs effectively, you need to know exactly how these two figures stack up against each other. They serve different purposes for the insurer and the policyholder.
What is Compulsory Excess?
This is a non-negotiable amount set by the insurance company. It is based on their assessment of your risk profile. Factors that influence this include:
- Your Age: Drivers under 25 often face much higher compulsory excesses.
- Driving Experience: If you have held your license for less than two years, expect a higher mandatory fee.
- Vehicle Type: High-performance or luxury cars carry a higher risk of expensive repairs, leading to higher excess.
- Claims History: A history of multiple accidents tells the insurer you are a higher risk.
What is Voluntary Excess?
This is a strategic tool you control. By “volunteering” to pay a larger chunk of a claim, you signal to the insurer that you are a responsible driver who won’t bother them with minor scratches or “frivolous” claims. In exchange for taking on more of the financial risk, the insurer rewards you with a lower annual premium.
| Feature | Compulsory Excess | Voluntary Excess |
| Who decides the amount? | The Insurance Company | You (The Policyholder) |
| Is it negotiable? | No | Yes (at the start of the policy) |
| Impact on Premium | None (it is fixed) | Higher excess = Lower premium |
| When do you pay it? | On almost all at-fault claims | On almost all at-fault claims |
How Voluntary Excess Works During a Claim
Many drivers are surprised by how the payment actually happens. Depending on your insurer and the type of claim, the excess is handled in one of two ways:
1. Upfront Payment to the Repair Shop
If your car is repairable, the insurance company will authorize the work at a certified body shop. Once the repairs are finished, you pay your total excess (compulsory + voluntary) directly to the garage before you can drive your car home. The insurer then pays the garage the balance of the bill.
2. Deduction from a Settlement Check
If your car is “totaled” (a total loss), the insurer will determine the Actual Cash Value (ACV) of your vehicle. Instead of asking you for a check, they simply subtract your total excess from the payout.
- Example: If your car is worth $10,000 and your total excess is $1,000, you will receive a check for $9,000.
When Do You NOT Have to Pay Voluntary Excess?
There are specific scenarios where the out-of-pocket requirement is waived. Understanding these can save you hundreds of dollars.
Non-Fault Accidents
If you are involved in a collision where another driver is clearly at fault and they (or their insurance) admit liability, you usually do not have to pay your excess. If you have already paid it to get repairs started, your insurer will “subrogate” the claim meaning they go after the other driver’s insurance to get their money back, along with your excess, which they then refund to you.
Uninsured Driver Promises
Some high-quality policies in the USA include an “Uninsured Driver Promise.” If you are hit by someone who doesn’t have insurance, and you can provide their license plate number and vehicle details, your insurer may waive your excess so you aren’t penalized for someone else’s illegal behavior.
Glass Only Claims
Many comprehensive policies have a separate, much lower excess for glass and windshield repair. In some cases, if the windshield can be repaired (rather than replaced), the insurer might waive the excess entirely to encourage you to fix it before it cracks further.
The Pro-Con Balancing Act: Choosing Your Excess Level
Choosing a high voluntary excess is a gamble. You are betting that you won’t have an accident, but you must be prepared to lose that bet.
The Benefits of High Voluntary Excess
- Lower Monthly Costs: This is the most common reason people choose it. It can drop your premium by 10% to 15%.
- Protects Your No-Claims Bonus: Since you have to pay a high amount for a claim, you are less likely to file for small dings. This keeps your “claims-free” status intact, which leads to even bigger discounts over time.
The Risks of High Voluntary Excess
- Financial Strain: If you set a $1,000 voluntary excess but only have $500 in your savings account, you won’t be able to get your car back from the repair shop after an accident.
- Small Claims Become Pointless: If you have $200 worth of damage but a $500 excess, your insurance is effectively useless for that incident. You are “self-insured” for anything under your total excess amount.
Statistical Reality: Why Insurers Love Excess
According to industry data, the average car insurance claim in the United States is approximately $4,000 for collision damage. By imposing an excess, insurance companies achieve two goals:
- Reduced Administrative Costs: Processing a $300 claim costs the company nearly as much in manpower as processing a $3,000 claim. Excess filters out these tiny, expensive-to-process files.
- Reduced “Moral Hazard”: When drivers have “skin in the game,” they statistically drive more carefully. A driver with a $0 deductible may be less concerned about a parking lot scrape than someone who knows that scrape will cost them $500 out of pocket.
Does Voluntary Excess Vary by State?
While the concept of voluntary excess (deductibles) is standard across the USA, specific state laws can change how they are applied.
- No-Fault States (like Florida or Michigan): In these states, your own insurance pays for your medical bills and sometimes car damage regardless of who caused the accident. This means you are more likely to have to pay your excess even if you didn’t cause the crash.
- Diminished Value Claims: Some states allow you to claim for the loss in resale value your car suffers after an accident. Your excess usually does not apply to this portion of the claim.
How to Choose the “Right” Amount for You
Don’t just pick the highest number to get the lowest price. Use this checklist to find your “Goldilocks” zone:
- Check Your Emergency Fund: Open your banking app right now. How much cash could you access in 24 hours? Your total excess should never exceed this number.
- Analyze Your Commute: Do you drive 50 miles a day in heavy stop-and-go traffic? Your statistical risk of a “fender bender” is higher, so a lower excess might be safer.
- Consider Your Car’s Value: If your car is only worth $2,000, having a total excess of $1,000 is rarely worth it. You are paying for insurance that will only ever pay out a maximum of $1,000.
Common Myths About Voluntary Excess
Myth: “If the accident is 50/50, I only pay half the excess.”
Fact: Insurance is usually binary when it comes to excess. If you are even 1% at fault in some states, or if the insurer cannot recover 100% of the costs from someone else, you pay the full excess.
Myth: “I can pay my excess in installments.”
Fact: Most body shops and insurers require the excess in a single lump sum. They will not release the vehicle until the “customer portion” of the bill is settled.
Myth: “Voluntary excess is the same as a co-pay in health insurance.”
Fact: Not quite. A health insurance co-pay is often a percentage or a small fee per visit. Car insurance excess is a “front-end” deductible you pay the first $X of the total bill, no matter how large the bill is.
FAQ: People Also Ask
1. Is voluntary excess mandatory?
No, it is optional. When you set up your policy, you can choose to set the voluntary excess to $0. However, doing this will almost certainly result in a higher monthly or annual premium because the insurance company is taking on 100% of the risk.
2. Can I change my voluntary excess after an accident?
No. You cannot adjust your excess level to cover a claim that has already happened. You can only change your excess levels when you first buy the policy, at your annual renewal, or sometimes mid-term if you haven’t filed a claim.
3. What happens if I can’t afford to pay my voluntary excess?
If you cannot pay the excess, the repair shop will legally hold your vehicle (a mechanic’s lien). If the car was totaled and you still owe money on a loan, the insurer will pay the lender the ACV minus your excess, which might leave you with a “gap” in what you owe the bank.
4. Do I pay voluntary excess for a cracked windshield?
Usually, no. Most policies have a specific “Glass Deductible” that is much lower (often $0 to $100) and is separate from your standard collision or comprehensive voluntary excess.
5. Does voluntary excess apply to Third-Party claims?
No. If you hit someone else and damage their car, your liability insurance covers their repairs. You do not pay an excess for damage you cause to others; the excess only applies to the repairs for your own vehicle.
6. Can I get a refund of my voluntary excess?
Yes, but only if your insurer successfully recovers the full cost of the claim from an at-fault third party. This process can take months, so you should be prepared to be without that money for a while.
Conclusion: Balancing Monthly Savings with Out-of-Pocket Risk
Voluntary excess is one of the most powerful levers you have to control the cost of your car insurance. While it is tempting to “crank up” the excess to see your monthly premium drop, you must remain grounded in your actual financial reality. A $1,000 voluntary excess is a great deal until you actually need to use your insurance.
Be honest about your driving habits, the value of your vehicle, and the health of your savings account. If you’re a safe driver with a healthy emergency fund, a higher voluntary excess can save you thousands of dollars over a decade. If you’re living paycheck to paycheck, paying a slightly higher premium for a $0 or $250 voluntary excess is a form of financial protection that ensures an accident won’t leave you stranded without a car.
At AtozInsuranceusa, we believe that transparency is the key to trust. We don’t just want to sell you a policy; we want you to understand how every dollar of that policy works for you. Whether you are looking to lower your premiums through a higher voluntary excess or seeking the peace of mind that comes with a low deductible, AtozInsuranceusa provides the expert insights you need to drive with confidence across the USA.
