Comparing PI Insurance Excess Structures in the UK

Why “best deductible” is the wrong question

Buyers often ask which insurers have the best excesses (or deductibles — in UK professional indemnity the terms are used almost interchangeably for the amount you bear before the policy pays). The question has no stable answer, for two reasons. First, excess terms are set risk by risk: the same insurer will quote different excesses to different firms, and different excesses to the same firm in different years. Second, and more fundamentally, excesses differ in structure, not just in amount — and the structure often matters more than the number. This page explains the structures so you can compare quotes properly.

Each-and-every-claim versus aggregate

An each-and-every-claim excess applies afresh to every separate claim: three claims in a year means bearing the excess three times. An aggregate excess caps your total contribution for the policy period: once your combined payments reach the aggregate figure, the insurer pays subsequent claims from the ground up. Neither basis is inherently better. A firm that realistically faces at most one claim in a bad year may be indifferent; a firm whose work generates a higher frequency of small claims may find an aggregate cap changes the economics of a bad year entirely. Some policies blend the two — an each-and-every excess subject to an annual aggregate cap. Always identify which basis a quote uses before comparing figures.

Costs-inclusive versus costs-in-addition

The second structural question is what the excess applies to. Under a costs-inclusive excess, your excess is eroded by defence costs as well as damages — so the meter starts running as soon as lawyers are engaged, even if the claim is ultimately defeated. Under a costs-in-addition (or costs-exclusive) approach, the excess applies only to damages and settlements, with defence costs handled separately. The difference bites hardest on claims that are defended successfully: with a costs-inclusive excess you can spend your entire excess on a claim that ends with no payment to the claimant at all.

Nil excess on defence costs

Some professional indemnity wordings apply a nil excess to defence costs: the insurer pays the costs of defending you from the first pound, and your excess applies only to damages. For professions where allegations are made more often than they succeed, this feature can matter more than a modest difference in the excess amount, because the commonest way firms actually feel their excess is through the cost of being defended. When you compare quotes, establish for each one whether defence costs attract the excess — and if so, on what basis.

The excess-versus-premium trade-off

Excess level is one of the levers that moves premium: broadly, accepting a higher excess reduces the premium, because you are retaining more of the risk, and a lower excess costs more. Insurers will often quote alternative excess options on request. The right point on that curve depends on your cash flow and your claims outlook. A higher excess suits a firm with reserves that wants to insure catastrophe rather than nuisance; a lower excess suits a firm that could not comfortably absorb even one retention. Be honest about the bad year, not the average year: an each-and-every excess is borne per claim, so the test is whether you could fund it two or three times over if things went wrong.

Why “best” depends on your claims profile

Put the pieces together and it is clear why no insurer can be said to offer “the best” excess. As an illustrative scenario, not a real case: two quotes carry the same excess amount, but one is aggregate and costs-in-addition while the other is each-and-every and costs-inclusive. For a surveying practice with a steady trickle of small allegations, the first structure is plainly the more valuable; for a one-person consultancy that has never seen a claim and wants the lowest workable premium, the second may be perfectly rational. Same numbers, opposite conclusions — the answer lives in the firm, not the insurer. This is precisely the kind of structural comparison a whole-of-market broker runs across every quote it obtains.

Going deeper

We have written a fuller technical treatment of how these structures interact — including how excess terms behave across layered programmes: Excess structures: the deep dive. For a decision on your own renewal, the practical route is simpler: gather the quotes, tabulate amount, basis and costs treatment side by side, and weigh them against your own claims history and cash position — or ask us to do it with you.

Frequently asked questions

Which insurers have the lowest professional indemnity excess?

There is no fixed answer: excess terms are set risk by risk, so the same insurer quotes different excesses to different firms and in different years. Structure matters more than size — the basis (each-and-every or aggregate) and the treatment of defence costs can outweigh a difference in the amount.

What is the difference between an excess and a deductible in PI insurance?

In UK professional indemnity the words are used almost interchangeably for the amount you bear before the insurer pays. What genuinely varies between policies is how that amount applies: per claim or in aggregate, and to damages only or to defence costs as well. Check the wording rather than the label.

Is a higher excess worth it to reduce my PI premium?

Sometimes. A higher excess generally lowers the premium because you retain more risk, and it suits firms with the reserves to absorb a retention or two. Judge it against a bad year, not an average one — an each-and-every excess is payable on every separate claim. A broker can quote alternative excess levels so you can see the trade-off priced.

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