When you arrange your motor insurance policy, you get the chance to stipulate how much excess you are willing to pay. This means that if your car is repaired through your insurance policy, you have to pay a certain amount towards the cost. You will usually have to make the payment direct to the garage that fixes your car. If your car is badly damaged and is consequently written off, the insurance company will give you a settlement payment, minus the excess that has been agreed on the policy.

If the accident was no fault of your own, then the other driver's insurance company will reimburse you for the amount of the excess payment. However, not all situations are that simple, because what happens if the other driver does not have any insurance?

It is illegal for any driver in the UK to drive uninsured (see the 1988 Road Traffic Act, section 143), all drivers must be insured so as to cover the costs if they cause damage to a third party. Unfortunately, many drivers take the law into their own hands and choose to drive uninsured. It's impossible to make an accurate estimate of how many people are driving uninsured, of course, most uninsured drivers aren't going to publicise that fact.

The Department of Transport has used its own information and records to make an informed estimate, and they suggest that as many as 1 in 20 drivers are driving without insurance. Because of these people, drivers who have insurance are paying more on their premiums, and many road users are being put at risk on a daily basis. The fact that many drivers have no insurance is being considered as a growing problem in our society.

Why does it matter so much if you have an accident with an uninsured driver? Well, if the accident is their fault, the money to pay for your damages will come out of the Motor Insurers' Bureau funds – they get all their money from the industry, which is why you're paying more on premiums. The other disadvantage is that there will be no-one to refund you the excess, so you will be out of pocket too.

What does Compulsory Excess mean?

When you sign up for your car insurance policy, you will have to choose an excess, but the insurance company will stipulate the minimum amount that they are prepared to offer you. This will be based on your driving record and your personal details, and if you are an experienced driver with a clean record, you may be offered a minimum excess of £50. The average for most drivers is £100. On the opposite end of the scale, young drivers or those with convictions or accidents that were their fault may be faced with a compulsory excess of £500.

What does Voluntary Excess mean?
You may have the opportunity to lower your premiums by agreeing to a higher excess. Your voluntary excess is the additional amount over the compulsory excess that you are prepared to pay if you need to make a claim. Because you are promising to pay the insurance company more in the event of a claim, they are able to pass on some of the savings to you, so you pay less on premiums.

My car has just been prepared but until I pay the excess, they won't give me my car back – is this normal?

Yes, all garages operate in this way. To protect yourself, give the car a full inspection when you pick it up to ensure that all the repairs have been carried out to a good standard. You also need to make sure you keep the receipt for the excess payment because you will need to show this to the third party insurer to get the money back. In case the money ends up being disputed, also get a copy of the repair schedule so the insurer can see exactly what work was carried out on your car.

Michael Challiner writes for Brokers Online, a large Uk finance portal who specilise in Life Insurance, Car Insurance ( www.life-assurance-bureau.co.uk/car-insurance/ )and also offer most other UK financial services including Mortgages ( www.life-assurance-bureau.co.uk/mortgages/ ).

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