Car insurance excess explained: how it works in Australia

A plain-English guide to car insurance excess in Australia — what it is, the different types, how it interacts with your premium, and what to weigh when choosing yours.

Excess is one of those words that gets glossed over until you're actually claiming. It's also one of the most useful levers you have on your premium — provided you understand all the moving pieces. This guide unpacks the lot.

If you're newer to car insurance generally, the car insurance hub covers the surrounding basics first.

What is car insurance excess?

An excess is the amount you contribute toward each claim before the insurer pays the rest. It's set at policy start and it usually applies to most claim types, with exceptions and additions spelled out in the PDS.

Excess does two jobs at once. It reduces the cost of small claims for the insurer, which keeps the underlying premium lower than it would otherwise be. And it gives you, the policyholder, a financial nudge to think twice before lodging a tiny claim.

Key types of excess to understand

• Standard (basic) excess — the headline excess on the policy. You usually choose this at quote time.
• Age-based excess — applied when the driver at the time of the claim was under a certain age (commonly 25). Sits on top of the standard excess.
• Inexperienced driver excess — applied when the driver hasn't held a full licence for long enough. Can apply to older first-time drivers too.
• Unlisted driver excess — applied when someone not listed on the policy was driving.
• Specific event excess — some policies apply an extra excess for events like theft, hail, or first claim within a year.
• Voluntary excess — an extra amount you choose to take on in exchange for a lower premium.

A single claim can attract more than one of these at once. The PDS sets the rules.

How to choose your excess level

1. Re-quote at multiple excess levels. A common pattern is $500, $1,000, $1,500. This shows the price sensitivity for your specific situation.
2. Check the saving curve. If lifting the excess from $500 to $1,500 only saves $80 a year, the maths may not stack up against the higher out-of-pocket at claim time.
3. Stress-test against your finances. Could you comfortably pay the higher excess if you needed to claim tomorrow? If not, that's a real constraint.
4. Account for additional excesses. A $500 standard excess can become $1,500 with an age-based excess on top.
5. Compare across insurers. Different insurers price excess steps differently. The compare car insurance page covers the matched-input approach.

Common mistakes to avoid

• Picking the lowest excess by default. Often inflates the premium for years between claims you may never make.
• Picking the highest excess to chase savings when you couldn't realistically pay it.
• Forgetting the layered excesses. An $800 excess can quickly become $2,000+ for a young driver claim.
• Assuming not-at-fault means no excess. Some policies still charge it upfront and refund later, only if the other driver can be identified.
• Not reading the excess section of the PDS. The cleanest way to see exactly which excesses apply to which claim types.

What affects which excess may suit you

• Cash buffer. A higher excess only saves money if you can comfortably pay it.
• Driving environment. Heavy commuting, lots of urban driving, or higher-risk parking may make smaller claims more likely.
• Driver mix on the policy. Younger or less experienced drivers add layered excesses.
• Claim history. Recent claims often nudge people toward keeping the standard excess accessible.
• Premium sensitivity. If the saving curve is steep, lifting the excess pays off; if flat, it doesn't.

For more on lowering the premium without taking on too much excess risk, see how to lower your car insurance and our broader excess explainer.