By Felix Kong｜Licensed Insurance Agent
Looper Insurance Agency Limited (GA1034)
Published: 2026-08-31｜Last updated: 2026-08-31

A quotation usually shows two numbers: the premium, and the excess (also called the deductible; the Insurance Authority's education site renders it in Chinese as 自付額 or 墊底費). Most buyers assume both are theirs to set, which is how "raise the excess, lower the premium" became a rule of thumb. In practice one policy carries several excesses, and some were never your choice. They were added by underwriting to reflect your risk. Miss that distinction and you have not saved money, you have moved the cost to the day of the loss. Looper Insurance Agency Limited (GA1034), a licensed Hong Kong insurance agency, compares quotations across several insurers for clients, and this is the column that most often needs unpacking.

Table of Contents

1. What an excess is, and why one policy has several

2. Two kinds of excess: the one you choose and the one underwriting adds

3. Motor versus commercial

4. The small claim maths

5. When raising the excess is the wrong move

6. Four questions before you sign

7. FAQ

1. What an excess is, and why one policy has several

The Insurance Authority's insurance education glossary defines a deductible or excess as the specific amount of loss the policyholder has to bear when an insured event occurs, with only the portion above that amount claimable from the insurer. The Community Legal Information Centre puts the same point in policy terms when it explains motor cover: a policy usually contains an excess clause setting out the initial amount of the claim you must meet before the insurer indemnifies you.

What catches people out is not the definition but the count. An excess is set by section, by peril, and by who was involved.

A Hong Kong policy usually carries more than one excess. Property, liability and business interruption can each have their own. Fire, water damage, typhoon and landslip can each have their own again. Motor policies then add further excesses based on driver age, driving experience and the type of incident. So "what is my excess" is the wrong question. The right one is which excesses this particular claim triggers, and what they add up to.

2. Two kinds of excess: the one you choose and the one underwriting adds

The Investor and Financial Education Council, through its Chin Family site, sets out the motor position plainly: a young driver generally means a driver under 25, an inexperienced driver means one who has held a licence for less than two years, and both attract additional excesses. The same page adds that "you may be able to obtain a lower insurance premium with a higher excess, but be sure you can afford to pay the excess if you need to."

Those two statements mark the dividing line. The second describes a voluntary excess, which is a trade. The first describes an imposed excess, which is a condition of acceptance, and only one of them is a lever in your hands.

There is a second feature that rarely shows on the front page of a quotation: excesses stack.

Motor excesses are cumulative. Above the general excess a policy can add an unnamed driver excess, a young driver excess (generally under 25), an inexperienced driver excess (generally under two years' licence), a parking damage excess and a theft excess. One claim can trigger several at once, so the deduction is the sum of the applicable items on the schedule, not the single "standard excess" figure quoted to you.

The traffic runs the other way as well. Some policies grant a conditional waiver, for example removing the third party property damage excess for a personal client where the owner was driving, was aged between 30 and 45, and had held a licence for over two years. This column is not a one way ratchet, provided you know to ask.

3. Motor versus commercial

On the motor side there is a boundary many owners misread. Section 4(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272) requires any person using, or permitting the use of, a motor vehicle on a road to hold third party cover meeting the statutory requirements. The excess you agreed with your insurer does not reduce what the injured third party receives. The Community Legal Information Centre notes that the insurer remains at liberty to seek contribution or indemnity from a defaulting owner or driver under the policy. A third party property damage excess is money the insurer advances and then looks to you for.

The logic under the Employees' Compensation Ordinance (Cap. 282) is the same. The compensation duty sits with the employer and the policy indemnifies the employer, so any excess arrangement on an EC policy cannot reduce an employee's statutory entitlement. It only decides who funds that slice.

Commercial policies use a wider range of forms. The following are wordings we have seen when checking client policies. They illustrate structure rather than any market standard, and the figures on your own policy have to be read off your own schedule.

• Fixed sum: a commercial fire policy carries no standard excess on the basic fire perils, while the bolted on extra perils such as earthquake, impact by vehicles and typhoon carry an excess of the first HKD 3,000 of each non fire loss

• The greater of a sum or a percentage: landslip and subsidence at HKD 10,000 or 10% of the loss, whichever is higher

• Time excess: loss of rent cover with the first two weeks as the excess, and business interruption extensions for denial of access and failure of public utilities that only respond after 48 continuous hours

• Penalty excess: premises left unoccupied for more than 60 consecutive days without notice attract an additional excess of 5% of the reinstatement cost at claim time

• Large loss waiver: a single loss above HKD 500,000 waives the standard excess, while the specific subsidence, unoccupancy and water damage excesses stay in place

Commercial excesses come in four common forms: a fixed sum for each and every loss, a percentage of the loss, the greater of the two, and a time excess such as a business interruption waiting period or the first two weeks of a loss of rent claim. Some policies add a large loss waiver, under which a single loss above a stated figure attracts no standard excess. The four behave very differently on small claims, which is why comparing quotations on premium alone is unsafe.

4. The small claim maths

You do not need a market rate to work out whether the trade is worth taking. Ask each insurer to quote the current excess and the higher excess side by side, then run three steps.

1. Premium saving = current annual premium minus the higher excess premium, which is what you save each year

2. Excess gap = new excess minus old excess, which is what one loss now costs you extra

3. Break even = excess gap divided by premium saving, which is how many claim free years it takes to come out level

The longer that break even period, the more you are accepting a large one off exposure for a modest discount. The table below is arithmetic only and reflects no policy wording or market level.

The smaller the loss, the larger the share the excess consumes. Past a certain level every small loss falls below the excess, which means you hold a policy that responds only to a disaster. That can be the right call if your cash flow absorbs small losses. It should be a decision, not a discovery made after the claim.

Motor buyers have a fourth variable. A small claim costs you the excess and then costs you the No Claim Discount, so a few thousand dollars recovered this year can be repaid through higher premiums over the next two or three renewals. The motor break even calculation needs that accumulated difference added in.

5. When raising the excess is the wrong move

Thin cash flow. An excess is cash you need on the day of the loss. Without reserves you have turned a predictable annual cost into a random one off shock.

High frequency, low value exposures. Retail, food and beverage, small site damage and vehicle fleets share a pattern of several modest losses a year rather than one large one. A higher excess pushes claims that would have been paid back onto you.

A contract that sets the terms. Leases, tenders and main contracts often specify a maximum excess as well as a minimum limit, so a raised excess may not comply.

A quotation that already carries an imposed excess. Where driver age, claims record or the condition of the premises has already attracted an additional excess, adding a voluntary layer doubles what you carry.

An inadequate sum insured. Fix the sum insured first, since trading cover for premium while the sum insured is short leaves you exposed at both ends. Note also that an excess normally applies to each and every loss, so for a business with several locations or vehicles one typhoon can mean several excesses.

6. Four questions before you sign

1. Is this excess each and every loss or an aggregate for the policy period?

2. Which sections and perils carry their own excess, and are any expressed as percentages or subject to a large loss waiver?

3. Does the quotation include an imposed excess, and can it be removed by changing the terms of cover, for example by naming drivers?

4. If the excess moves from A to B, what is the annual premium difference, and for motor, what happens to the No Claim Discount?

Get the answers in writing. Nobody recalls a verbal excess arrangement on the day of a claim.

FAQ

Q: Are an excess and a deductible the same thing?

A: In Hong Kong general insurance they describe the same mechanism. The Insurance Authority's education glossary treats deductible and excess as one term, defined as the specific amount of loss the policyholder must bear before claiming the balance from the insurer.

Q: Does a higher excess always cut the premium?

A: The direction holds, but the size of the saving has to be quoted, not assumed. The Investor and Financial Education Council notes that a higher excess may bring a lower premium provided you can afford to pay it. Ask each insurer to quote both the current and the raised excess, then divide the excess gap by the annual saving to get your break even period.

Q: Can an imposed excess be removed?

A: Rarely by request, but the cause can often be addressed. A young driver or inexperienced driver excess may be handled through the named driver arrangement, while an excess driven by premises condition or claims history responds to risk improvements and a clean year. Ask what triggers the excess, then work on the trigger.

Q: A small loss exceeds my excess. Is it worth claiming?

A: For motor, weigh the net recovery against the No Claim Discount you lose and the higher premiums over the next two or three renewals, which often outweigh the payment. Commercial policies have no NCD, but the claim still shapes next year's underwriting. Either way, the incident normally has to be notified within the time limit set by the policy.

Q: Does my excess reduce what an injured third party receives?

A: No. Section 4(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272) requires third party cover for vehicles used on a road, and the third party is paid. The excess is an arrangement between you and your insurer, which may then seek contribution or indemnity from a defaulting owner or driver. It decides who bears the amount, not whether the third party is compensated.

Next step

You can map your own excess structure without waiting for renewal. Take out the policy schedule and count how many excess entries it contains, which are percentage based, whether any are time excesses, and whether a lease or contract caps the figure. Send us the policy and the schedule and we will list them item by item and compare premium and excess combinations across several insurers at the same level of cover.

Related Articles

• Motor Insurance in Hong Kong: Third Party vs Comprehensive (English Guide)

• Public Liability Insurance in Hong Kong: An English Guide for Businesses and Owners

• Shop Package or Standalone Public Liability? A Decision Guide for Hong Kong SMEs

• It Was Not Your Dog. You Can Still Be Liable: Occupiers' Liability for HK Restaurants

Free Quote

Looper Insurance Agency Limited (GA1034) offers a free policy check and quotations, including an item by item read of your excess structure.
Tel: 2633 6813
Email: cs@looperin.com
Website: www.looperin.com

Disclaimer: This article is for reference only and does not constitute insurance or legal advice. Policy wordings quoted are individual examples used to illustrate structure and do not represent market standards; the arithmetic table is illustrative only. Your actual excess, waivers and coverage are governed by your own policy terms and schedule.

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