This episode is brought to you by the financial services school. Specialising in educating insurance professionals. So if we’ve already paid for the privilege of transferring risk to the insurer… Why must we now also pay an additional fee in the form of an excess, when we have a loss. Well, fair question, the answer falls into two parts: Now leaving time excesses for another video, today we’ll focus on a traditional excess sometimes called a deductible. The first, insurance or risk transfer forms only one option under risk management, the second is risk acceptance. This is the amount of risk we are willing to accept ourselves. So, looking at our motor policy for example… When you take out your insurances, you are most likely presented with a couple of options as to the excess you would like to accept. For argument’s sake let’s say they are $500 and $1000. Each option will have an impact on the overall premiums however. So, if you were to select the $1000 excess, your premiums should be lower because you’ve accepted more of the risk yourself, transferring only losses that exceed $1,000 to the insurer, with you covering the initial $1,000 yourself! Likewise if you selected the $500 excess, your premiums would likely be higher as you’ve transferred more of the risk. It’s extremely important the decision be made for the right reasons. Simply selecting the $1,000 option as a reduces of cost of insurance for the year is not the correct one! This is just another form of buying on price, not cover! The real question you need to ask yourself is: “How much exposure you’re willing to cover personally?” Click here for another video we did, give us a thumbs up if you found this helpful. Comment with more stuff you wanna know about and for more demystified insurance jargon, click that subscribe button!