The excess is the amount you pay out of pocket when you make an insurance claim. Most people know this in principle, but the details of how excess actually works in Australian car insurance, particularly the different types that can stack up and when each applies, are worth understanding before you need to make a claim.
Most comprehensive car insurance policies in Australia include multiple types of excess that can apply simultaneously. Understanding each one matters because the total excess on a single claim can be significantly higher than what you see quoted as the "standard" excess at purchase.
Basic excess. This is the standard excess that applies to every at-fault claim. It is the figure you choose when you set up or renew your policy, and it directly affects your premium. A higher basic excess means a lower premium; a lower basic excess means a higher premium.
Age excess. Most Australian insurers automatically apply an additional excess if the driver at fault is under 25. The amount varies by insurer but is typically between $500 and $1,500. Some policies split this further, with a higher age excess for drivers under 21 than for those aged 21 to 24. This excess is non-negotiable in most standard policies: it applies regardless of how experienced the young driver is.
Inexperienced driver excess. Separate from the age excess, some policies apply an additional excess if the at-fault driver is aged 25 or over but has held their licence for fewer than two years. This is less common than an age excess but worth checking if you or someone who drives your car is recently licensed.
Unlisted or unnamed driver excess. If a driver who is not listed on your policy is involved in an at-fault accident, most policies apply a significant additional excess, typically $1,500 to $3,000. Some insurers call this a "driver not on policy" excess or an "unnamed driver" excess. If family members or housemates regularly drive your car, add them to the policy. The premium increase is almost always less than the unnamed driver excess on a single claim.
Choosing a higher basic excess reduces your annual premium. The trade-off is that you pay more when you do claim. Whether this is a good deal depends on how often you expect to claim and the size of the difference in premium.
As a general rule, increasing your basic excess from $500 to $1,000 saves approximately $100 to $200 per year on a typical comprehensive policy for a mainstream vehicle, depending on the insurer and your risk profile. Increasing it from $1,000 to $2,000 might save a further $150 to $300 per year.
If you claim once every seven years on average, and the premium saving from a higher excess is $150 per year, you save $1,050 over seven years but pay an extra $500 to $1,000 when you do claim. The net benefit of the higher excess depends on whether the premium saving over multiple claim-free years exceeds the additional out-of-pocket cost when you eventually do need to use the policy.
For older, lower-value cars, a high excess can make the policy less useful. If your car is worth $8,000 and your total excess on a claim would be $2,500, you are only getting $5,500 of protection from your insurer in the worst case. That may still be worth paying for, but the economics look different than on a $50,000 vehicle.
A few questions help set the right level. How much cash could you access in an emergency? If a $2,000 excess would create genuine hardship, set it lower. If you have a savings buffer and would rather pay less in premiums, a higher excess makes sense. What is the car worth? On a high-value vehicle, a higher excess keeps premiums manageable without significantly reducing the claim payout you would receive. On a low-value car, an excess above about 20 to 25% of the car's value starts to erode the point of having comprehensive cover.
A common practical choice for Australian drivers is a basic excess in the $750 to $1,500 range, depending on their financial buffer and car value. Anything above $2,500 starts to reduce the effective cover on lower-value vehicles.
This is one of the most misunderstood aspects of car insurance. The basic excess typically applies when you make a claim and you are at fault, or when the at-fault driver is unidentified (for example, a hit-and-run). The age, unnamed driver, and inexperienced driver excesses apply on top of the basic excess when the relevant driver was involved and at fault.
If you are not at fault and the at-fault driver is identified and insured, most comprehensive policies waive your excess entirely. Your insurer pursues the other party's insurer for the cost. If the at-fault driver is identified but uninsured, most policies waive your excess on the basis that you cannot reasonably pursue an uninsured driver. Some policies still apply the basic excess in this scenario, so check your PDS.
Compulsory Third Party (CTP) insurance, which is mandatory in all Australian states and territories, covers personal injury claims from road accidents. It is structurally different from comprehensive car insurance: there is no excess in the usual sense because CTP is not a first-party product (you are not claiming for your own losses). The premium is set by the relevant state authority or licensed insurer, not selected by the policyholder, and claims are made by injured parties against the at-fault driver's CTP policy.
Comprehensive insurance covers damage to your vehicle and to third-party property. This is where excess applies. The two products work side by side but the excess concept only exists in your comprehensive policy, not in CTP.
The basic excess is negotiable at purchase: simply choose a different amount when getting a quote. Age and unnamed driver excesses are generally fixed by the insurer's underwriting rules and cannot be waived by calling to negotiate. The way to avoid the unnamed driver excess is to add regular drivers to the policy upfront.
Some insurers offer an "excess-free windscreen" add-on, which waives the excess on glass claims. This is worth considering if your car has an expensive windscreen (modern vehicles with ADAS cameras integrated into the glass can cost $1,000 to $3,000 to replace), and the add-on premium is usually modest.
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