PI Insurance Excess Explained

What exactly is the excess on a PI insurance policy?

The excess is the amount you pay yourself toward each claim before your insurer covers the rest. If your excess is GBP2,000 and you have a GBP50,000 claim, you pay GBP2,000 and your insurer pays GBP48,000. The excess is essentially your 'skin in the game'--it ensures you're motivated to prevent claims and reduces your insurer's administrative costs for small claims. Typical PI insurance excesses in the UK range from GBP0 (rare) to GBP5,000+, with most professionals paying GBP500-GBP2,000. The higher your excess, the lower your premium. It's a trade-off: accept more upfront cost per claim, pay less in premiums.

How does excess affect your actual PI insurance cost?

Higher excess = lower premium. Reducing excess from GBP2,000 to GBP500 typically costs 10-15% more in annual premium. Reducing to GBP0 excess (no out-of-pocket cost) might cost 20-30% more. For many professionals, a GBP1,000-GBP2,000 excess is the sweet spot: affordable premiums and reasonable out-of-pocket risk. If you rarely make claims (most professionals don't claim often), accepting a higher excess saves money on premiums. If you're in a high-claim-frequency business (legal services, for example), a lower excess protects you better. Calculate: if lowering excess costs GBP200 more per year but saves you GBP2,000 if a claim happens, is that worth it? For most, yes.

How does excess work when you have multiple claims?

Each claim involves a separate excess. If you have two claims in one year with a GBP1,000 excess, you pay GBP1,000 toward each claim. Some policies have a 'first claim free' or waived excess on certain types of claims. Others specify that the excess applies per claim. Check your policy wording. Some also have an 'aggregate excess'--a maximum total excess per year. For example: GBP1,000 per claim but maximum GBP3,000 excess per year. This means if you have four claims, you only pay the first GBP3,000 total, not GBP4,000. Understand your policy's excess structure--it dramatically affects your actual out-of-pocket costs if claims happen.

"Most professionals never claim. So accepting a GBP2,000-GBP5,000 excess to save GBP300 on premiums makes mathematical sense over your career. It's a low-probability event you're insuring against, not a frequent occurrence."

- Insurance underwriter

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