The amount that an insured has to pay towards making a claim. The policy excess is clearly set out in an insurance policy and it shall be agreed with an insured before the policy is issued. A policy excess is the part of a claim that is not covered or paid by an insurance firm. In other words, it is a reduction in insurance premium that will impact the final (net) amount of premium to be paid out. For specific types of insurance (e.g., travel insurance), a separate policy excess is usually charged for each individual claim under a policy.

For example, a total claim for $2,000 is not paid out in its entirety. An excess amount (of $100) is not covered by an insurer: implying that only a sum of $1,900 is paid out.