Deductibles and Excess are common terms applied when an individual takes out an insurance policy in order to protect him or herself from unforeseen losses and damages. The insurance provider will put forward different types of policies for a potential policy holder, who will then determine his or her needs before choosing the premium, deductible amount or any excess insurance requirements.
Deductibles, simply put, form the amount which the insured will have to pay from his own pocket before the insurer deals with the remaining amount. This is typically used in order to deter large number of claims. For instance, if the damages are in the region of $1000, then you must pay the initial amount, depending on your policy limit, before the insurance policy kicks in. The deductibles will vary on the type of policy you have attained, and may be as low as $100. Higher deductibles nonetheless, usually come with lower premiums.
Excess, on the other hand is a second policy taken out by the insured over and above the initial or base policy. This is usually required in sensitive cases such as liability insurance. They can be accessed through various mechanisms, such as excess insurance, gap insurance or umbrella insurance. For instance, the excess policy may be required in auto liability cases, where third party damages have occurred due to your negligence. Similarly, if you have a mansion which is worth millions, the insurance company will ask you to purchases an excess property policy, in addition to your base policy.
The difference between the two stems from the above facts, where deductibles are compulsory, while excess can be voluntary or compulsory. Moreover, deductibles are simply the amount you will be meeting from your own wallet, whereas excess is an altogether new policy. On top of that, in some cases, excess is treated as a deductible when the claim amount exceeds your insurance coverage limit.