Excess Waiver Explained

Published by
Lethabo Ntsoane

In many circumstances, insurance policies do not cover the entire amount due in the event of a covered incident. As a result, you must pay the remaining amount to cover the outstanding balance of a covered incident.

For example, a car insurance policy will pay 70% of the losses caused by a car accident, and you, as the policyholder, will be responsible for the remaining 30%. The 30 percent that you owe as a policyholder must be paid first before the insurer pays the 70% to cover the total loss or damage.

The majority of South Africans who are insured cannot afford to pay such a large sum of money all at once. As a result, a product like an excess waiver is required. The excess waiver provides insurance policyholders with a platform to invest such that any insurance policy shortfall is compensated by the excess cover.

Before we proceed any further, let’s have a look at the following. What is an Excess Waiver, and how does it work? We’ll look at how an excess cover works and more as we answer these questions.

What is an Excess Waiver?

The amount paid for coverage beyond an insurance policy’s basic liability limit is known as the excess waiver. Excess Waiver is a type of coverage that extends beyond the limitations of an insurance policy. In South Africa, however, various names are used to indicate an excess waiver, and the phrase Gap Cover is used to represent the cover that pays above the baseline limit of medical aid.

The excess waiver insurance cover can be tailored to meet the client’s insurance demands and to protect one from expensive excesses. This product is often sold separately, although it can also be added to an existing insurance policy using an in-house insurance facility.

Characteristics of an Excess Waiver Insurance

  • Excess Waiver is the amount paid for cover beyond the basic liability limits in an insurance contract.
  • This insurance product is mostly offered as a stand-alone product.
  • The product can be taken as a byproduct of an insurance policy that does not cover the total loss or damages that may be incurred as a result of a covered incident.
  • Excess Waiver is mostly for insurance products that have a predetermined reimbursement schedule. For example, an insurance policy will state that it only covers 85% of the damages or losses caused by a covered incident.

How does Excess Waiver Insurance Work?

Insurance contracts have conditions, one of which is the amount of coverage or a percentage of the liability covered by an insurance product. Since these costs are predefined when signing a contract, an excess amount can be budgeted to cover the risk beyond the insurer’s liability.

An excess waiver gives additional coverage if a covered occurrence occurs and exceeds the covered amount. For example, a dent cover of R1000.00 may be purchased but if one incurs dents costs to the amount of R1500.00, excess waiver insurance will disburse the R500.00 excess that the policyholder was required to pay.

Excess waiver insurance, like any other insurance product, has its own set of limitations. Excess Waiver Insurance also has a coverage amount. For example, you may have R100,000 in automobile insurance coverage for accidents and an excess waiver of up to R200,000.00. As a result, excess waiver insurance will only cover damages and losses up to R200,000.00.

As a result, because the excess waiver is typically a stand-alone product, premiums may be costly. The more coverage you desire, the higher the premiums will be. Excess waiver insurance may not be the greatest option for additional coverage when your insurer provides additional coverage at an additional cost but with discounts.

What to consider when purchasing an excess waiver insurance

When looking for excess waiver insurance, there are two things to consider: whether the insurer you are using offers excess waiver insurance and whether you should look into the reinsurance market.

In-house

When seeking excess waiver insurance, the first step is to look from the insurer that you are using. In-house excess waiver insurance has several advantages, such as a discount on rates for both your excess waiver insurance and your main insurance product.

There aren’t many insurers who offer excess waiver insurance, so in most cases, you’ll have to look elsewhere for coverage. 

Reinsurance Market

Reinsurance Market is your best bet to get excess waiver insurance. The reinsurance market is full of small risk financing companies that are backed by large insurers. Excess waiver insurance from a reinsurance market is usually a stand-alone insurance package that supplements your primary insurance coverage.

You will go through a separate underwriting procedure and be quoted according to your current risk profile. Therefore, the insurer will provide you with new contract terms and conditions. You will then be required to choose the cover amount that you want to for your excess waiver limit. 

Advantages of the Excess Waiver Insurance

  • Provides coverage for sums that are not covered by your current insurance policy.
  • The amount insured is configurable, and the amount can be adjusted to meet the insurance needs of the individual.
  • Premiums for in-house excess waiver insurance are sometimes discounted.
  • There are many insurers for this type of insurance, therefore, you can get competitive prices.

Disadvantages of the Excess Waiver Insurance

  • Amount that is insured by an excess waiver insurance may not be able to fully cover the excess amount payable.
  • Using a third party insurer may make the cost of the Excess Waiver Insurance a bit high when compared to getting in-house excess waiver insurance or increasing the cover amount on your primary insurance policy.

Conclusion

If you have an insurance policy that demands an extra payment, Excess Waiver Insurance is something to consider. Looking in-house first can save you money on premiums and is regarded as the finest approach to obtain cost-effective excess waiver insurance.

Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted at lethabo@rateweb.co.za

Published by
Lethabo Ntsoane