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Insurance Excess NZ

Your Insurance Excess Experts.

Let’s begin by addressing a fundamental question: What is insurance excess? In insurance terminology, excess refers to the sum you agree to pay towards a claim on your policy. It’s a financial commitment you make upfront that has a significant influence on the cost of your insurance and the amount you’ll be paid when you file a claim.

Consider this hypothetical situation: Your office suffers water damage, and the repair costs amount to $5,000. If your insurance excess is $500, you will cover that amount and your insurer will foot the remaining $4,500 bill. Understanding this principle is crucial as it forms the backbone of your insurance policy.

Topics covered

The ABCs of Insurance Excess

How does your Insurance Excess work? 

It’s the amount you agree to pay towards the cost of a claim before your insurance company steps in to handle the rest. It’s not an additional fee or an upfront cost, but a financial commitment you make when a claim arises.

The Rationale Behind Insurance Excess

Insurance excess exists for a reason. It’s an essential tool for insurance companies to mitigate risk, reduce the number of minor claims, and prevent fraudulent claims, while keeping the premiums affordable.

The Different Flavours of Insurance Excess

Insurance excess comes in various forms – compulsory, voluntary, or imposed, depending on the risk level, the insurer’s policy, and your personal preferences.

Insurance Excess and Your Business Insurance Policy

Nearly all business insurance policies, including public liability, professional indemnity, property, and motor vehicle insurance, come with an insurance excess.

Insurance Excess & Premiums: An Inverse Relationship

The relationship between insurance excess and premiums is simple. Opting for a higher excess generally equates to lower premiums, while a lower excess can lead to higher premiums.

Imagine two boutique store owners, Owner A and Owner B. Owner A opts for a high excess and enjoys lower premiums, while Owner B chooses a lower excess, which results in higher premiums. Over the course of several years, even with occasional claims, Owner A manages to save more on insurance costs due to the lower premiums.

Business Insurance: The Role of Insurance Excess

Insurance excess is an essential element of business insurance. Depending on the type of business insurance policy you choose, the role of insurance excess and how it’s applied can vary.

A Closer Look at Property Insurance

Consider, for example, property insurance. Businesses are generally at low risk for events like fires or major structural damage. Hence, insurers typically expect a higher insurance excess for these policies. The rationale is that these events, while highly damaging, are infrequent. Therefore, the insured party could opt for a higher excess (reducing their premium costs) since the likelihood of needing to make a claim is relatively low.

Unpacking Public Liability Insurance

On the other hand, public liability insurance often sees more frequent claims due to its nature of covering incidents involving third parties in your business premises. Here, a high excess could mean a substantial out-of-pocket cost whenever a claim is made. Therefore, opting for a lower excess, even if it means a higher premium, could be more beneficial.

General Business Insurance: A Mixed Bag

General business insurance policies are a mixed bag of coverages. From property damage and theft to liability claims and even business interruption, these policies can cover a vast array of risks. The role of insurance excess in such a diverse policy spectrum can vary widely, making careful consideration and expert advice essential.

Choosing Your Insurance Excess: Factors to Keep in Mind

When it comes to deciding on your insurance excess, consider your risk tolerance, financial capacity, the cost of premiums, and the potential cost and frequency of claims.

Debunking Myths About Insurance Excess

A common misconception is that a higher insurance excess is always better because it reduces your premiums. This isn’t always the case, as John, a local cafe owner, discovered when an unexpected incident led to a hefty out-of-pocket payment because of his high insurance excess.

Deciding on the Right Insurance Excess for You

Choosing your insurance excess should involve evaluating your business’s risk profile and financial situation. This is where Gerrards Insurance Brokers come in, offering expert advice and helping you make the optimal decision.

Case Studies: How Insurance Excess Influences Claim Payouts

Scenario 1: High Excess, Low Premiums

Let’s start with Mike, owner of a small tech startup. He opted for a high insurance excess to keep his premiums low. Unfortunately, one day, a fire caused by a short circuit destroyed several expensive pieces of equipment. The damage amounted to $10,000. His insurance policy had an excess of $2,000.

When Mike filed the claim, he had to pay the initial $2,000 for the damaged equipment out of pocket. The insurance company then covered the remaining $8,000. This initially seemed daunting, but due to the money Mike had saved over the years on premiums, he was still financially stable after the payout.

Scenario 2: Low Excess, High Premiums

Next, meet Sophia, who runs a fashion boutique. She opted for a low insurance excess due to her high-risk location, resulting in higher premiums. One unfortunate night, a burglary resulted in a loss of $5,000. With an insurance excess of $500, Sophia paid this initial amount and her insurer covered the remaining $4,500.

Though Sophia had higher premiums, her decision to opt for a lower excess paid off in this instance, reducing the financial burden at the time of the incident.

Scenario 3: Balancing Act

Finally, let’s take the example of Liam, a café owner. Liam sought advice from Gerrards Insurance Brokers and chose a balanced approach to his insurance excess. He settled on a moderate excess that allowed him manageable premiums without risking high out-of-pocket expenses in case of a claim.

When an accident in his café led to damages of $3,000, Liam’s excess of $1,000 meant he bore a part of the costs, but his insurance covered the rest. Liam’s balanced approach allowed him to manage the claim without significant strain on his business finances.

These scenarios underscore the crucial role of insurance excess in shaping your claim payouts and highlight the importance of carefully considering your excess in line with the nature and risk profile of your business.

FAQs: Unraveling Complexities of Insurance Excess

We encourage all clients to ask questions about insurance excess. Having a firm grasp of this concept helps you make an informed decision about your insurance coverage. Contact us if you have a question, we are more than happy to help.

Gerrards Insurance Brokers: Your Ally in Understanding Insurance Excess

At Gerrards Insurance Brokers, we believe in empowering our clients by helping them understand the intricacies of insurance excess and guiding them to select the best policies for their businesses.

Wrapping Up: Key Takeaways on Insurance Excess

Insurance excess plays a significant role in managing your business’s financial risks. With the right guidance, you can strike a balance that suits your business needs perfectly.

Connect with Gerrards Insurance Brokers for Tailored Consultation

Still have queries about insurance excess? Don’t hesitate to reach out to us at Gerrards Insurance Brokers for a personalised consultation. We’re here to ensure you get the best possible cover for your business insurance.