Alistair, one of our BDM team, examines excesses and why they need to be a focal point of your GI conversations.

Taking a risk-based approach to excesses

When discussing home insurance with your clients, it can be all too easy to brush over excesses. However, excesses really should be an important part of the conversation with your client. It’s one of the main areas where you, as the expert and giver of advice, can really add value and differentiate your services to what your client might experience online with the likes of comparison websites.

It's good to keep in mind that an excess is personal to the individual's own circumstances. For example, the amount of food eaten by someone who is 6ft tall would be vastly different from the portion sizes of a person who stands at just 4ft!

For many clients, choosing their Buildings and Contents excesses will be driven by wanting to keep their annual premium or monthly payments to a minimum. However, it’s important to take a risk-based approach and understand the customer’s propensity to claim - whether they’re likely to claim on low-value items or consider replacing the items without making a claim.

To put it into insurance-specific terms; a £1500 television could take some people several months to save up for and replace if it were damaged. But, paying a £50 or £100 may be a better option that could allow them to get back to relaxing in front of that television in a matter of days rather than months.

On the other hand, other customers may choose to replace a TV without making a claim and may then want a higher excess to reduce the premium. In summary, the excess should be used to tailor the policy to each customer, balancing the type of and cost of items they’re likely to claim for, the premium, and the amount they’re willing to pay to make a claim.

How excesses work when your client has both buildings and contents insurance with Paymentshield?

Each element of cover has its own excess for the client to select, from £50 to £500 in increments of £50. This means that your client could set the building's excess at £300 but have their contents insurance set at just £100.

Setting different excesses for buildings and contents cover is totally optional but could be beneficial to the client to help them keep their overall cost of insurance low while ensuring that should they need to claim their excess payments are also relatively affordable.

It is, therefore, a key area where advisers can add value during a client conversation. The average person is generally more likely to claim on their contents than their buildings insurance, and building claims are often for a much higher value than a contents insurance claim. For instance, a £500 excess might seem huge for a carpet replacement, but for a full property rebuild of up to £500,000, it may feel relatively insignificant.

If your clients need to make a claim on either Buildings or Contents, they will need to pay the excess associated with that policy. If they need to claim on both at the same time, for example in the event of an escape of water claim that has not only damaged the floors and ceilings of their home but also damaged furniture, paintings, and other belongings, they won’t need to pay two types of excess. Instead, they’ll only have the pay the higher of the two. If customers choose an excess of £100 on both Buildings and Contents, they will only pay £100 should they need to make a claim.

Lastly, customers should be aware that some insurers will charge a compulsory excess when making a claim, on top of the voluntary excess they chose when purchasing the policy.

The compulsory excess needs to be taken into account when selecting a voluntary excess to ensure claims are affordable. Did you know that Paymentshield doesn’t have a compulsory excess for making a claim? This means it’s entirely up to your clients how much they agree to pay. However, there are mandatory excesses to pay for Subsidence (£1000) and Escape of Water (£500).

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