What is 'excess' in insurance terms?

In insurance terms, 'excess' refers specifically to the amount that a policyholder must pay out of pocket before their insurance coverage kicks in to cover the remainder of a claim. This is a common feature in many types of insurance policies, including property, auto, and health insurance. By requiring the policyholder to bear a portion of each claim, insurers can help prevent minor claims and encourage responsible use of coverage.

The excess amount can vary depending on the policy and the terms agreed upon at the time of purchase, and it serves a dual purpose: it reduces the insurer's exposure to small claims and often results in a lower premium for the policyholder. Understanding excess is crucial for policyholders as it directly affects how much financial responsibility they bear in the event of a loss.