You get into an accident, send your car to the workshop and make an insurance claim. Since you have comprehensive car insurance, you might assume the insurance company will simply pay the entire repair bill. Then you hear the workshop or insurer mention one word: excess. So what exactly is it, and why might you still need to pay money even though your car is insured? Excess is actually quite simple once you understand how it works. More importantly, knowing about it before an accident can prevent an unpleasant surprise when it's time to make a claim.
What Does Excess Mean in Car Insurance?
In simple terms, excess is the amount you may have to pay yourself when making certain car insurance claims. The insurer then covers the remaining eligible amount according to the terms and conditions of your policy. For example, imagine your eligible accident repair cost is RM4,000 and an excess of RM400 applies to the claim. You would pay RM400, while the remaining eligible repair cost would be handled by the insurer, subject to the policy terms. This means having comprehensive insurance doesn't necessarily mean you'll never have to pay anything yourself after an accident.
Why Does Car Insurance Have an Excess?
One reason excess exists is to make the policyholder responsible for a portion of certain losses instead of passing every ringgit of the claim to the insurer. It can also discourage very small claims. Imagine getting a minor scratch that costs RM300 to repair while your applicable excess is already close to that amount. Depending on the situation, making an insurance claim may not make much financial sense. That's why it's useful to understand your excess before deciding whether to claim.
Is Excess the Same for Everyone?
No. The excess that applies can depend on your insurance policy, the type of claim and the circumstances surrounding the accident. Your policy schedule and policy wording should state the applicable excess and conditions. This is important because two people with comprehensive car insurance may not necessarily face exactly the same out-of-pocket amount after an accident. Rather than assuming there is one standard excess for every Malaysian driver, check the actual terms of your own policy.
Compulsory Excess for Certain Drivers
This is where Malaysian drivers should pay particular attention. Under commonly used Malaysian private-car policy wording, an additional RM400 compulsory excess can apply to an own-damage claim when the vehicle was being driven by certain categories of drivers at the time of the accident. For example, this can include a driver who is under 21 years old, holds a provisional (P) or learner (L) driving licence, or is not named in the policy schedule as a named driver, subject to the exact wording of the policy. This amount can be payable in addition to any other excess stated in the policy. Here's a simple example. Your car is involved in an accident while being driven by someone who falls under one of the categories where the compulsory excess applies. Even though the car has comprehensive insurance, you may still have to pay the applicable excess before the insurer covers the remaining eligible repair costs. This is one reason it's worth checking who is listed as a named driver on your car insurance policy.
Excess Doesn't Mean Your Insurance Isn't Working
Seeing an excess on a claim can be frustrating, especially if you weren't expecting it. But it doesn't automatically mean your insurer is refusing to cover the accident. Think of it as the portion of an eligible claim that you're responsible for paying under the policy. If an RM400 excess applies to an eligible RM10,000 repair bill, for example, paying RM400 doesn't mean the insurance was useless. The insurer may still be covering a much larger portion of the repair cost. The important thing is understanding the amount you're responsible for before approving repairs or proceeding with the claim.
Excess and Betterment Are Not the Same Thing
These two terms are easy to mix up because both can result in you paying money during an insurance claim. But they mean different things.Excess is the portion of a claim that you're required to bear yourself when the relevant policy conditions apply. Betterment, on the other hand, may come into the picture when an older vehicle receives new original parts during repairs. Depending on the vehicle's age and the applicable policy terms, the owner may need to contribute towards the cost of those new parts. So if a workshop tells you there's an amount you need to pay, don't immediately assume it's excess. Ask what the charge is actually for.
Does Excess Affect Your NCD?
Excess and No Claim Discount (NCD) are separate things. Paying an excess doesn't automatically protect your NCD. Whether your NCD is affected depends on the type and circumstances of the claim. For example, an own-damage claim arising from an accident where you're at fault can generally affect your NCD. In certain eligible situations where another identifiable vehicle is at fault, an Own Damage Knock-for-Knock (OD-KFK) claim may allow you to claim through your own insurer without losing your NCD, subject to the applicable requirements. So when deciding whether to make a claim, don't look at the excess alone. Consider the repair cost, applicable excess, potential betterment and possible impact on your NCD together.
Most of us don't read our car insurance policy until something goes wrong. Unfortunately, that's usually the worst time to discover terms you didn't know existed. Before your next renewal, take a few minutes to check your policy schedule and understand the excess that applies to your coverage. Look at who is listed as a named driver and check whether there are any additional excess conditions you should know about. You don't need to memorise every page of your policy. You just need to understand what you're covered for and what you may still need to pay yourself. Because when an accident happens, the last thing you want is another surprise waiting for you at the workshop.