Etienne du Toit, chief commercial officer at Momentum short-term insurance, explains that the aim an excess is to eliminate small value claims which are costly to administer, and helps keep premiums lower for you and other policyholders.
He says excess protects you from fraudulent, invalid, unwarranted and high volumes of low value claims, and keeps premiums competitive.
"This is typically a fixed rand amount, but in some instances, insurers will provide the option of a percentage of the sum insured."
Recovering excess from a third party
If someone else caused your loss, the insurer may be able to recover the cost of the claim, including your excess, and then reimburse you. However, there is no obligation on an insurer to recover the excess from another party, but that if they are going to attempt to recover the full claim, they will usually include your excess, the ombud explains.
"The success of a full recovery however depends on several factors, including whether you identified the other party, whether they admitted fault, whether there are any witnesses, whether they have insurance and, if not, whether they have the ability to pay," the ombud says.
Du Toit says that while the insurer will typically attempt to recover the excess if a third party caused the damage and is found to be at fault, the responsibility still sits with you to pay your excess before a claim will be settled.
"Since many South Africans remain uninsured, and many not financially able to pay for damages out of their own pocket, in practice only a small percentage of excess payments are recovered from third parties," he says.
The ombud says that if your insurer decides not to attempt to recover the excess or if it fails in its attempts, it should advise you so that you can decide whether you want to try to recover the excess yourself.
If you are unhappy with your excess, it is best to pay it and get your claim settled, and then dispute it with your insurer, the ombud says. If that fails you can lodge a complaint with the ombud.