Excess is a term commonly found in insurance, especially in health and motor insurance. Many policyholders don’t fully understand this concept and are surprised when they still have to pay some costs even after filing a claim.
So, what exactly is an insurance excess, why does this cost arise, and how can you manage it to avoid financial strain? Let’s dive into the details.
What Is an Insurance Excess?
An insurance excess refers to the amount a policyholder must pay out-of-pocket if the total cost of a claim exceeds the insurer’s coverage limit. This applies to both health and vehicle insurance under private insurance plans.
This cost arises because the insurance provider sets a maximum coverage limit, and any amount beyond that must be paid by the policyholder.
In simple terms, if the total cost of treatment or repair is higher than what your insurance covers, the excess is the difference you’ll need to pay yourself.
Why Does Excess Occur?
Excess in insurance can happen for several reasons, such as insufficient coverage limits, incomplete documentation, or treatments/services not covered by the policy. Here are some common causes:
1. Exceeding the Coverage Limit
Every
insurance policy comes with a maximum coverage limit. Many people don’t realize that even if they have insurance, they may still need to pay extra if their claim exceeds this limit.
For example, if your claim exceeds the policy’s ceiling, you’ll have to cover the difference.
2. Treatment Not Covered by the Policy
Not all medical services or treatments are covered. If you undergo treatment outside your policy coverage, you’ll need to pay for it yourself.
Always check whether the treatment is included in your policy before making a claim.
3. Incomplete Claim Documents
Incomplete or incorrect documentation is a common reason for claim reduction or denial. For health insurance, typical documents required include:
- Insurance card
- Doctor’s certificate
- Medical examination results
- Hospital payment receipts
If anything is missing or invalid, the insurer may reduce or deny your claim. Always ensure all documents are complete before submitting a claim.
4. Exclusions in Policy Coverage
Every insurance policy has exclusions. If the event or risk is not included in your coverage, the claim may be denied or only partially paid.
5. Using a Non-Partner Hospital
Many insurers have networks of partner hospitals for easier claims. If you seek treatment outside the network, you may face excess charges or need to file a reimbursement claim.
To avoid this, always use a hospital or clinic listed as a partner by your insurer.
Examples of Insurance Excess
The way excess applies depends on the type of insurance. Here are some examples:
1. Health Insurance Excess
Let’s say your inpatient limit is Rp500,000 per day, but the hospital charges Rp700,000. You’d have to pay the Rp200,000 difference daily.
If surgery costs Rp15 million but your policy only covers Rp12 million, you’ll pay the Rp3 million excess.
2. Vehicle Insurance Excess
In vehicle insurance, the excess is often called “own risk.” This is the amount you pay for each repair claim.
For example, if a car repair costs Rp5 million and your policy has an Rp300,000 own risk fee, you pay that amount and the insurer covers the rest.
How to Determine the Right Insurance Excess
Understanding how to manage excess is key to avoiding unexpected costs. Here’s how to determine and manage it wisely:
1. Evaluate Your Risk
Assess how likely you are to make a claim based on your health, lifestyle, or driving habits.
For instance, if you frequently drive, you might be more exposed to accidents—choosing a policy with a lower excess can be a safer option.
2. Read the Policy Details Carefully
Every policy has different terms regarding limits, exclusions, and excess amounts. Be sure to understand:
- Maximum coverage limits
- Types of benefits (inpatient, outpatient, accident)
- How much you’ll pay before the insurer starts covering costs (excess or deductible)
3. Choose a Policy with Suitable Limits
Make sure the policy’s coverage limits are realistic. For example, if hospital rooms in your area cost around Rp750,000 per day but your policy only covers Rp500,000, you’ll need to pay an excess of Rp250,000 per day.
4. Review Your Insurance Regularly
Your insurance needs can change—due to health changes, growing assets, or lifestyle shifts. It’s important to periodically review your coverage and consider upgrading if necessary.
5. Compare Multiple Insurance Options
Not all insurers have the same excess policies. Compare offers to find the best balance between protection, excess, and premiums.
Key things to compare:
- Excess amount
- Coverage and benefit limits
- Premium costs
- Insurer reputation and claims service
By comparing options, you can find a policy that offers strong protection with manageable out-of-pocket costs.
Determining your insurance excess is a crucial step to ensure you get optimal coverage without facing large out-of-pocket expenses. This way, you can manage your excess more effectively and avoid financial surprises.
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