Category: Insurance definitions · Reviewed by Mark Fox, Broker · Renewals · Last reviewed May 2026
On a UK professional indemnity policy, “excess” and “deductible” usually mean the same thing — the first amount of any claim that the insured pays before the insurer’s cover responds. Where they differ is in how the figure is applied to defence costs, how it interacts with the limit of indemnity, and which mechanism is more common in which market.
Both terms describe the insured’s contribution to a claim. The insurer pays the loss above the figure; the insured pays everything up to it.
Excess is the more common term in UK PI wordings. It is usually applied “each and every claim” — meaning the insured contributes the excess on every separate claim notified in the policy period. If the policy excess is £5,000 and three unrelated claims are notified in the year, the insured pays £5,000 on each, totalling £15,000.
Deductible is more common in US-influenced markets and on large-corporate or syndicate wordings written for international risks. In strict insurance language, a deductible is sometimes applied differently from an excess — it can be drawn from the limit of indemnity rather than sitting underneath it, meaning that the limit available to the claim reduces by the deductible amount. In practice on most UK PI policies the two words are used interchangeably to describe the same thing: the first slice the insured pays.
The wording is what controls. Read the schedule and the relevant clause in the policy wording — the labels matter less than the mechanism described.
When a claim is notified, the insurer takes conduct of investigation and defence. As costs accrue, the insured’s excess is usually held back until either the claim settles or settlement negotiations are sufficiently advanced. At that point the insurer either nets the excess off its payment to the claimant, or asks the insured to fund it directly.
On most UK PI policies the excess sits underneath the limit of indemnity. A £500,000 limit with a £5,000 excess means the insurer pays up to £500,000 above the first £5,000. The total cover available to the claim is £505,000 — the limit plus the insured’s contribution. Some wordings invert this: the limit is the maximum total payable including the excess, so the insurer’s net exposure is £495,000. Again the wording controls.
Excess can apply to defence costs as well as to damages. On a “claim-by-claim” excess, the insured pays the excess once on each notified claim regardless of how the £5,000 is spent — on defence, settlement or both. On some wordings the excess is “damages only” — the insurer funds defence from pound one, and the insured contributes only when settlement is reached. The damages-only structure is less common and usually attracts higher premium.
A single circumstance that generates more than one claim is normally aggregated into one excess. The aggregation language in the wording defines what counts as one claim — typically “claims arising from one originating cause” or similar.
A Bristol consultancy carries £500,000 each-and-every-claim PI with a £5,000 excess. Two separate matters are notified during the policy year.
Matter A: A client alleges negligent advice that cost them £80,000. Defence costs total £20,000; settlement is £60,000. Total claim cost: £80,000. - Insured pays £5,000 excess. - Insurer pays £75,000. - Limit remaining (on an each-and-every basis): unchanged for the next claim.
Matter B: A different client alleges a £180,000 loss. Defence costs total £35,000; case settles at £140,000. Total claim cost: £175,000. - Insured pays £5,000 excess. - Insurer pays £170,000.
Across the year, the insured has paid £10,000 in excesses on the two separate claims. If the wording had used an “aggregate excess” of £5,000 — much less common — the insured would pay £5,000 once across both matters. If the wording used a damages-only excess, the £5,000 would only fall due against the settlement payment in each matter, not against the defence spend.
Now compare to a higher-excess option. If the same firm had taken a £25,000 excess to reduce premium, Matter A would cost the firm £25,000 (the firm absorbs the entire £20,000 defence plus £5,000 of the settlement). Matter B would still cost £25,000. The premium saving needs to be worth the £40,000 additional self-funded exposure across the two claims.
Excess level and structure matter most in three situations.
First, on smaller claims. Many PI claims notified to insurers settle below £20,000 once defence costs and a modest settlement are added together. A high excess means many of those claims are effectively self-funded — the firm pays the lot, and the policy never actually responds. Firms with a steady run of low-value claims need to keep the excess proportionate.
Second, on firms with multiple ownership or multiple offices. Aggregation of claims under one excess depends on what counts as “one claim”. A multi-office practice that notifies several similar matters across different partners may find each is treated as a separate claim with a separate excess, multiplying the firm’s self-funded exposure.
Third, on cash-flow planning. Excess is funded by the firm out of working capital at the point of settlement. A £25,000 excess is a real number for a small firm and needs to be available when called. Firms running tight on cash sometimes prefer a higher premium and a lower excess.
The main variations seen on UK PI wordings:
Each and every claim excess. The standard structure. The insured pays the stated figure on each separately-notified claim. Most UK PI policies use this.
Aggregate excess. Less common. The insured pays up to the stated figure across all claims in the policy period; once exhausted, the insurer responds in full.
Excess applied to defence costs and damages. The standard structure on most non-solicitor PI. The excess applies to everything the insurer pays out, defence and damages together.
Damages-only excess. The insurer funds defence from pound one and the excess only attaches to the settlement. Less common but available on some wordings, usually at higher premium.
Excess in addition to limit / inside the limit. As with defence costs, the schedule needs to clarify whether the excess sits below the limit (so the limit responds in full above the excess) or is netted off the limit (so the insurer’s maximum exposure is the limit minus the excess). Most UK PI is the former; check the wording.
SRA solicitors. The SRA Minimum Terms and Conditions cap the level of self-insured excess for solicitors at £10,000 each and every claim multiplied by a defined formula, and require that excess does not apply to defence costs payable by the insurer. Solicitors’ qualifying insurance excess wording is set by the MTC.
ARB architects, RICS surveyors, ICAEW accountants. None of these professional regulators cap the excess in the way the SRA does. Excess is between the firm and the insurer.
Excess interacts directly with defence costs inside vs outside the limit — both determine who pays what when a claim runs hot. It also interacts with each and every claim versus aggregate limit structure, because the aggregation of claims under one excess follows the aggregation of claims under the limit.
Is there a difference between excess and deductible on a UK PI policy?
In strict terms a deductible can be drawn from the limit (reducing the cover available) while an excess sits underneath it (preserving the cover above the excess). In UK PI practice the two are usually used to mean the same thing — the insured’s first contribution. Read the wording, not the label, to see how it actually works.
Does the excess apply to defence costs?
Usually yes — on most UK PI policies the excess applies to everything the insurer pays out, including defence costs as well as damages. Some wordings limit the excess to damages only, with the insurer funding defence from the start. The SRA Minimum Terms for solicitors require that defence costs be paid by the insurer in addition to the policy limit and free of the firm’s excess.
Does each claim attract a fresh excess?
On a standard each-and-every-claim excess, yes. Each separately-notified claim attracts the excess. Multiple claims arising from the same originating cause are usually aggregated into one claim with one excess; the wording’s aggregation clause defines what counts as one. Less common aggregate excess structures cap the firm’s total contribution across the year.
What is a typical excess level for a UK PI policy?
It varies by profession and firm size. Sole practitioners and small firms often sit between £2,500 and £10,000. Mid-sized practices commonly carry £10,000 to £25,000. Larger firms with high premiums may take excesses of £50,000 to £250,000 to reduce premium. The right level depends on claims experience, cash flow and worst-case exposure.
Can I increase my excess to reduce premium?
Yes, and insurers will reprice on request. The premium saving depends on the firm’s claims profile — for firms with a clean history and infrequent claims the saving can be material, while for firms with frequent small notifications the insurer’s reduction is more modest. Compare the annual saving against the multiplied per-claim cost on plausible claim frequencies.
Who pays the excess on a claim?
The insured firm. It is the firm’s contribution and is paid out of the firm’s working capital at the point of settlement or earlier if the insurer requires it. Excess cannot be insured by a separate policy in the UK PI market on regulated professions (the regulator effectively requires the excess to be a real first-loss exposure for the firm).
What if I have multiple claims arising from the same matter?
The wording’s aggregation clause defines whether multiple notifications are treated as one claim (one excess) or many (one excess each). Common aggregation triggers include “arising from one originating cause”, “from a single act or omission” or “from a series of related acts or omissions”. Disagreements between insurer and insured on aggregation can be significant in disputed claims.
Does the excess affect the limit available to the claim?
Usually not — on most UK PI wordings the excess sits below the limit, so the full limit responds above the excess and total cover is limit-plus-excess. Some wordings (sometimes labelled “deductible” rather than “excess”) draw the deductible from the limit, reducing the cover available. The wording is the controlling document.
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Apex Insurance Brokers Ltd is a Bristol-based independent insurance broker authorised and regulated by the Financial Conduct Authority (firm reference number 724952). Companies House registered number 07014570. We arrange professional indemnity insurance for UK professional firms across architecture, surveying, accountancy, consultancy and related sectors. Contact: info@apexinsurancebrokers.co.uk or 0117 325 0027.
Last reviewed: May 2026 by Apex Insurance Brokers Ltd.
Important: this article is general information, not advice on your specific circumstances. For advice on PI insurance for your firm, contact us on 0117 325 0027 or info@apexinsurancebrokers.co.uk.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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