Terminology

A Quick guide to insurance terminology

Excess (see Deductible and First Amount Payable)

This is the first amount payable by you or deducted by the insurer in the event of a valid claim. In other words, the excess is that part of the loss, damage, or damage/claim that the insurer does not pay for. It can be a fixed amount or a percentage of the claim, depending on the specific insurer’s policy wording. Insurers may allow you to choose your excess amount in exchange for a lower premium.

Example

Example of the calculation of the excess:
Your policy wording states that your excess is 10% of the claim or a minimum of R1 000. The excess is calculated on the value of the claim or item/property insured. Where the claim is:

R100 000 – the excess would be 10% of R100 000 i.e. R10 000
R10 000 – the excess would be 10% of R10 000 i.e. R1 000
R5 000 – the excess would be the minimum of R1 000
R500 – the excess would be the minimum of R1 000 and therefore not worth submitting a claim.

TYPES OF EXCESSES

Basic excess

This refers to the minimum excess payable in terms of all claims submitted under that policy. This will be the compulsory excess that needs to be paid before the insurer will pay your claim.

Additional excess

When there is more than one excess applicable to the same claim over and above the basic excess, these are called additional excesses and are usually added together (accumulated) and added to the basic excess. In some instances, you are able to choose additional excesses, and these form part of your policy (see voluntary excess below).

Voluntary excess

A voluntary excess is an additional excess agreed to by you in exchange for a reduction in premium. It is added to the basic excess.

Example:

If you have a basic excess of R100 and a voluntary excess of R250, when you submit a claim for R1 000, you will need to pay R350, and your insurer will pay the remaining R650.

Cumulative excess

This is used when additional excesses are added together, if applicable to the same claim.

Ex gratia payment

This is a discretionary payment made to you by the insurer as an expression of goodwill when there is no legal obligation to pay the claim under the terms of the policy. This payment is made to you without your insurer admitting any liability (responsibility) under the policy. Ex gratia payments cannot be regarded as a binding standard that will be followed by the insurer in the future.

Exclusions

Exclusions are specific items, losses, or events that are not covered in terms of your policy. These will be specified in your policy wording and it is important that you read your policy carefully. Exclusions may also sometimes be referred to as "exceptions."

Extensions

These are additional or extra ("add-on") covers or benefits that may be included in your policy. Some of these may be at an additional premium.