CLAIMS & POLICY MECHANICS
Excess definition
An excess is the part of an insured loss that the policyholder must pay before the insurer contributes to the claim.
In practice, this is often used synonymously with ‘deductible’. However, unlike a deductible, an excess does not affect the aggregate policy limit. An excess refers to the portion of an insured loss borne by the insured (rather than the insurer). This gives insurers, brokers, reinsurers and risk managers a shared way to discuss the concept when reviewing policies, claims, regulation or market data.
This term is especially useful in relation to insurance market analysis, policy wording and risk transfer decisions. It helps determine how much the insurer may pay and how much risk remains with the insured. It also helps users compare how insurance is structured, regulated, priced or claimed across different markets.
Excess is closely related to deductible, claim, limit of liability and self-insured retention. Linking these concepts together helps build a clearer glossary structure and gives readers a stronger understanding of how individual insurance terms connect within wider international insurance practice.
At a glance
- Used in
- Insurance market analysis, policy wording and risk transfer decisions.
- Purpose
- Helps determine how much the insurer may pay and how much risk remains with the insured.
- Important because
- Small differences in policy limits, values and retained amounts can materially affect claim outcomes.
- Related terms
- deductible, claim, limit of liability and self-insured retention.
Example of an excess in insurance
A policy has a GBP 5,000 excess. If a covered claim is GBP 30,000, the insured pays the first GBP 5,000 and the insurer considers the balance under the policy.