When it comes to insurance, ‘excess’ is one of those terms that can make or break your claims experience. Whether you’re navigating car, home, or health insurance, understanding excess—how it works, recent policy changes, and how to manage it—can mean the difference between a smooth payout and an expensive surprise. Let’s break down what Australians need to know about excess in 2025.
What Is Excess and Why Does It Exist?
Excess is the amount you agree to pay out-of-pocket when you make an insurance claim. For example, if your car is damaged and your excess is $800, you’ll pay the first $800 of repairs, with your insurer covering the rest (up to the policy limit). The logic behind excess is to discourage minor or frequent claims, keeping premiums lower for everyone.
In 2025, insurers are offering even more customisation. Many providers now let you choose your excess amount within a range—higher excess typically means lower premiums, and vice versa. However, there are a few important nuances to watch for:
- Standard Excess: The default amount on your policy.
- Voluntary Excess: An extra amount you can choose to add for further premium savings.
- Special Excesses: Additional excesses for specific scenarios (e.g. young drivers, flood cover, unlisted drivers).
2025 Policy Updates: New Rules and Industry Trends
This year, several insurers have revised their excess structures in response to climate-related claims and rising costs. Here’s what’s new in 2025:
- Flood and Storm Excesses: As severe weather events increase, many home insurers now apply higher ‘catastrophe excesses’—sometimes $5,000 or more for flood claims, compared to $500–$1,000 for standard claims.
- Youth and Inexperienced Driver Excess: For car insurance, the additional excess for drivers under 25 has risen across several major brands, often ranging from $600–$1,800 per claim.
- Multi-Policy Discounts: Some insurers are offsetting higher excesses by offering premium discounts if you bundle home, car, and contents policies together.
- Digital Claims and Excess Payment: Many providers now allow you to pay your excess online before repairs commence, speeding up the claims process.
It’s worth noting that some government disaster support payments in 2025 require proof of paid insurance excess to qualify for assistance, making documentation more important than ever.
How to Choose—and Manage—Your Excess in 2025
The right excess for you depends on your risk tolerance, budget, and the type of insurance. Here’s how to make a smart choice this year:
- Assess Your Savings Buffer: If you can comfortably afford a higher excess, you may enjoy significant premium savings over time. However, don’t set your excess so high that you’d struggle to pay it after an incident.
- Compare Policy Scenarios: Use online calculators or request quotes with different excess options to see how your premiums change. For example, increasing your car insurance excess from $600 to $1,200 could reduce your annual premium by $200–$400, but you’ll need to cover the higher outlay if you claim.
- Watch for Multiple Excesses: In some cases (such as a young driver in a flood-damaged car), more than one excess may apply. Always check your policy schedule.
- Keep Documentation: Make sure you have receipts or digital proof of excess payments, especially if you may need to access government relief or dispute a claim.
Real-world example: In early 2025, Queensland residents hit by cyclone-related flooding saw higher catastrophe excesses applied. Those who had set a low voluntary excess were sometimes caught out by special event clauses that overrode their choices. Always check for event-specific excesses in your policy fine print.
Conclusion: Stay Ahead of Excess Surprises
Excess is a crucial lever in every Australian insurance policy, and 2025’s changes make it even more important to review your cover. Whether you’re renewing, switching, or making a claim, take a few minutes to check your excesses—standard, voluntary, and special. The right settings can help you save on premiums and avoid unwelcome costs when you need your insurance most.
