Two policies with identical cover can differ noticeably in price, and the excess is often the reason. The figure is small relative to the sums insured and has an outsized effect.
The excess removes small claims from the system
An excess is the amount deducted from every settled claim. A claim below that figure is not worth submitting, so it never reaches the insurer at all.
Small claims are disproportionately expensive to handle because assessment costs are similar regardless of value. Eliminating them removes administrative cost as well as payouts.
That saving is passed into the premium. Raising the excess therefore reduces the price more than the arithmetic of the deduction alone would suggest.
It also changes behaviour
A traveller carrying part of each loss has more reason to take care of possessions and to weigh whether a claim is worth making. Insurers price for that effect.
The same logic drives excesses on vehicle rental and on medical cover in some markets. Cost sharing reduces frequency, not only severity.
Policies with no excess exist and are priced accordingly. They suit travellers who expect to claim for smaller items rather than only for catastrophes.
Excesses often apply per section and per person
Many policies apply the excess separately to each section of cover, so a trip involving both a medical claim and a baggage claim carries two deductions.
Family policies frequently apply it per insured person as well. An incident affecting several travellers can produce several excesses from one event.
This structure is set out in the policy schedule rather than in the marketing summary. It is the detail that most often surprises claimants.
Single item limits interact with it
Baggage sections cap the amount payable for any one item, and that cap frequently sits well below the value of a laptop or a camera. The excess is then deducted from the capped figure.
The combination can reduce a settlement to a fraction of the loss. Valuable items usually need to be declared and covered separately for meaningful protection.
Some policies waive the excess for specific sections, commonly medical treatment abroad. The waiver applies only where the wording states it.
Choosing a level
The relevant question is what loss the traveller could absorb without difficulty. An excess above that threshold converts insurance into cover for catastrophes only.
For a short trip with little of value, a higher excess and a lower premium is a coherent choice. For a long trip with equipment, the calculation differs.
Policy terms and available options vary by provider and by country, and they change over time, so the comparison has to be made against current documents rather than remembered ones.