Excess in Insurance 2026: What Australians Need to Know

Excess is the portion of a claim you pay yourself before your insurer covers the rest, up to your policy’s limit. For example, if your home insurance excess is $1,000 and you make a claim for $5,000 in repairs, you pay the first $1,000 and your insurer pays the remaining $4,000.

Excess exists to discourage small or frequent claims, helping keep insurance premiums lower for everyone. It also gives you some control over your policy costs: generally, a higher excess means a lower premium, while a lower excess means you’ll pay more for your insurance but less if you need to claim.

Most insurance policies in Australia include several types of excess. Understanding these can help you avoid surprises at claim time.

Standard Excess

This is the default excess amount set by your insurer for your policy. It applies to most claims unless a special excess is triggered.

Voluntary Excess

Some insurers let you choose to increase your excess in exchange for a lower premium. This is called a voluntary excess. It’s added to your standard excess, so if you select a voluntary excess of $500 on top of a $600 standard excess, you’d pay $1,100 if you make a claim.

Special or Additional Excesses

Certain situations may trigger extra excesses. Common examples include:

• Young or Inexperienced Driver Excess: If someone under a certain age (often under 25) is driving your car at the time of an accident, an additional excess may apply.
• Unlisted Driver Excess: If a driver not listed on your policy is involved in an incident, you may need to pay an extra excess.
• Event-Specific Excess: For example, some home insurance policies apply a higher excess for claims related to floods, storms, or other natural disasters.

Always check your policy schedule for details about which excesses may apply in different scenarios.

In 2026, Australian insurers continue to adjust excess structures in response to changing risks and costs. Here are some trends you may notice:

• Higher Excesses for Severe Weather Events: As climate-related claims rise, many home insurance policies now have higher excesses for flood or storm damage compared to standard claims. These special excesses can be significantly higher than the standard excess on your policy.

• Additional Excesses for Young Drivers: Car insurance policies often apply extra excesses for drivers under a certain age or with limited driving experience. These amounts can vary between insurers and may change over time.

• Bundling Discounts: Some insurers offer premium discounts if you bundle multiple policies (such as home, car, and contents insurance), which can help offset higher excesses in some cases.

• Digital Claims and Excess Payments: Many insurers now allow you to pay your excess online, making the claims process faster and more convenient.

It’s also important to note that, in some situations, government disaster support payments may require proof that you have paid your insurance excess. Keeping good records of your excess payments can be helpful if you need to access assistance after a major event.

Selecting the right excess is about balancing your ability to pay out-of-pocket costs with your desire for lower premiums. Here are some steps to help you decide:

1. Consider Your Financial Buffer

Think about how much you could comfortably pay if you needed to make a claim. Setting a higher excess can reduce your premium, but make sure you could afford to pay the excess amount at short notice.

2. Compare Premiums at Different Excess Levels

Most insurers let you see how your premium changes if you adjust your excess. You can request quotes or use online calculators to compare options. For example, increasing your car insurance excess may lower your annual premium, but you’ll need to cover a larger share of any claim.

3. Check for Multiple Excesses

In some situations, more than one excess may apply to a single claim. For example, if a young, unlisted driver is involved in a car accident during a flood, you could face several excesses at once. Review your policy documents to understand when this could happen.

4. Review Special Event Clauses

Some policies include special excesses for certain events, such as natural disasters. These can override your chosen excess settings. Always read the fine print so you’re not caught out by unexpected costs.

5. Keep Documentation

If you need to make a claim, you may be asked to provide proof of your excess payment. This is especially important if you’re seeking government assistance after a disaster. Keep receipts or digital records of any excess you pay.

Recent severe weather events have highlighted the importance of understanding special excesses. For instance, some Queensland residents affected by flooding found that their home insurance policies included higher excesses for flood claims than for other types of damage. In some cases, event-specific clauses overrode voluntary excess choices, leading to higher out-of-pocket costs than expected. This underlines the need to check your policy for any event-specific excesses that may apply.

With ongoing changes in the insurance industry, it’s a good idea to review your excess settings each time you renew your policy. Consider whether your current excess still suits your financial situation and risk tolerance. If you’re unsure, you can speak with your insurer or consult an insurance broker for guidance tailored to your needs.

Excess is a key part of every Australian insurance policy, and understanding how it works can help you avoid unwelcome surprises. In 2026, with insurers updating their excess structures and special clauses becoming more common, it’s more important than ever to review your cover. Take the time to check your standard, voluntary, and special excesses, and make sure your settings match your budget and circumstances. The right excess can help you save on premiums while ensuring you’re not left out-of-pocket when you need your insurance most.