Category: Motor · Reviewed by Amy Price, Account Executive · Personal · Last reviewed 2026-06-05
A voluntary excess is the amount of any insured loss that a policyholder elects to bear personally before the insurer’s liability is engaged, in addition to any compulsory excess imposed by the insurer, in exchange for a corresponding reduction in premium.
Category: Motor Also known as: voluntary deductible First codified: UK market practice; no statutory definition Related legislation: Financial Conduct Authority Handbook, ICOBS Apex Wiki link: /wiki/voluntary-excess/
A voluntary excess is the portion of any insured loss that the policyholder elects, at proposal or renewal, to bear personally before the insurer’s liability to indemnify is engaged. It is added to any compulsory excess imposed by the insurer, and the combined sum is deducted from the insurer’s payment on any covered claim [1].
The mechanism is most familiar in motor insurance but applies equally in home, travel and many commercial policies. The voluntary excess is an underwriting tool: by accepting a higher voluntary excess, the policyholder bears a greater share of small losses and aligns their interests more closely with the insurer’s, in exchange for a lower premium that reflects the reduced expected claims cost to the insurer.
In the UK retail motor market, voluntary excesses are typically offered in £50 to £100 increments from £0 to £750 or £1,000. The premium reduction generated by a higher voluntary excess varies materially between insurers and risk profiles; for a low-risk profile the marginal saving from an additional £100 of voluntary excess may be £5 to £20, while for a high-frequency risk profile the saving may be much greater.
The voluntary excess does not apply to the insurer’s third-party liability cover where doing so would defeat the third party’s claim under the Road Traffic Act 1988 section 148 [2]; in practice, voluntary excesses on motor policies apply to own-damage cover only.
The voluntary excess has no statutory basis and is governed by the policy wording. It is regulated indirectly through the Financial Conduct Authority Handbook:
The Insurance Act 2015 (for non-consumer contracts) and the Consumer Insurance (Disclosure and Representations) Act 2012 (for consumer contracts) govern the duty of disclosure and the consequences of misrepresentation [4] [5].
The Road Traffic Act 1988 section 148 voids policy conditions, including excesses, that would defeat a third party’s claim. Insurers therefore apply excesses to own-damage cover only and pay third-party claims in full, recovering the excess from the policyholder where appropriate.
The Financial Ombudsman Service has decided many cases on excess interpretation, particularly where multiple events are involved (one claim or two?) or where the excess is deducted from the gross or net settlement [6].
At proposal or renewal, the insurer’s quotation engine presents the policyholder with a range of voluntary excess options. Each option produces a quotation reflecting the underwriter’s discount for the higher excess.
When a claim is made, the insurer:
The voluntary excess applies per claim, not per policy year. A policyholder who makes two separate claims in a year pays the combined excess on each.
Where the loss is below the combined excess threshold, the insurer typically declines to handle the claim because the indemnity would be nil. The policyholder bears the cost in full but should still notify the insurer of the incident, particularly where a third party is involved or where the incident might be challenged later.
A particular wrinkle arises in non-fault claims handled through subrogation. The insurer pays the loss net of the excess; the excess is then recovered from the third party’s insurer through an uninsured loss recovery process. The policyholder receives the excess back if the recovery is successful. If unsuccessful (because the third party is uninsured or untraceable), the policyholder bears the excess unless they have separate uninsured loss recovery cover.
For brokers, helping the customer select an appropriate voluntary excess is a core part of the ICOBS 5 demands-and-needs analysis. A voluntary excess that produces a premium saving the customer cannot afford to repay in the event of a claim is not a fair outcome under the Consumer Duty [7].
Voluntary excesses vary by line of business:
Some insurers offer a single combined excess across multiple sections of a policy (so the policyholder pays only one excess for an incident affecting both buildings and contents). Others apply separate excesses per section.
In the US market the equivalent concept is the ‘deductible’. The terminology is interchangeable in international and reinsurance practice. In commercial property policies, an aggregate deductible may apply over a policy year, capping the policyholder’s excess exposure across multiple losses.
An illustrative example: a policyholder selects a £350 voluntary excess on a comprehensive motor insurance policy. The policy has a £150 compulsory excess for collision damage. Combined excess: £500.
The policyholder is involved in a fault collision. Own-vehicle repair cost: £2,200. The insurer authorises repairs at an approved repairer. The repair is completed and the insurer pays the repairer £1,700 (£2,200 less the £500 combined excess); the policyholder pays the repairer £500 directly.
In a separate non-fault claim caused by an identified, insured third party, the insurer pays the repair in full and pursues the third party’s insurer for recovery; the policyholder pays the £500 excess at the time and is reimbursed when the recovery is completed.
If, instead, the policyholder had selected a £0 voluntary excess, the same collision would have produced a higher annual premium (e.g. by £40 to £80 depending on rating) and the policyholder would have paid only the £150 compulsory excess. Figures are illustrative only.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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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