What is the purpose of car insurance excess?

The purpose of car insurance excess revolves around the requirement for the insured to pay a portion of a claim when they file for a payout under their policy. This practice serves several crucial functions in the realm of motor insurance.

Firstly, by imposing an excess, insurers encourage policyholders to take responsibility for their driving behaviors and reduce the likelihood of small claims, which can be inefficient for both the insurer and the insured. The requirement to cover part of the cost of a claim means that policyholders are less likely to make frivolous claims for minor damages, thus maintaining overall lower insurance costs.

Additionally, the excess acts as a deterrent against reckless driving, promoting safer behaviors on the road. When drivers are aware that they will need to pay a certain amount out of pocket in the event of an accident, they may be more inclined to drive cautiously to avoid incurring that financial burden.

The other options present different aspects of how insurance operates but do not align directly with the main function of excess. Increasing premiums for higher coverage relates to the selection of policy terms rather than the mechanics of excess. Covering premium payments during a policy period does not pertain to the excess concept, as it deals more with the financial obligations of the policy itself rather than claims management. Encour