Compulsory and Voluntary Deductibles in Car Insurance

When it comes to buying a car insurance policy, everyone tries to get adequate insurance coverage at an affordable premium. However, there are many options to reduce the premium amount, but amongst many, the voluntary deductible seems to be a good way to lower your car insurance premium, however, it is never advisable. It trims the amount of premium but could increase the burden on you at the time of the claim. To enjoy its benefit, you need to learn and understand about it in detail.

Basically, deductible is the part of monetary loss which is to be borne by the policyholder at the time of claim. Deductibles are classified into two segments which comprise Compulsory Deductible and Voluntary Deductible.

What is Compulsory Deductible in Car Insurance?

The compulsory deductible is decided by the insurers, in association with IRDAI guidelines, on the basis of multiple factors which primarily includes the engine capacity of the car. According to the Indian Motor Tariff, the rates of compulsory deductible for cars are standardized as:

• For cars with less than 1,500 cc – Rs. 1,000
• For cars with more than 1,500 cc – Rs. 2,000

The car insurance company may ask you to pay a higher amount of compulsory deductible, in case if your car is quite old or it has a higher cubic capacity or in various other conditions which enhances the risk of claim. The amount of premium is never lowered due to compulsory deductibles and it is computed based on factors such as the IDV of the car, its make, model, variant, etc.

What is Voluntary Deductible in Car Insurance?

Voluntary deductible is a part of the amount of insurance claim which policyholders agree to pay ahead before its request is raised to the insurance company. The agreement for this amount is predefined in the car insurance policy documents by the policyholder, which is based on his requirement and affordability. The higher the amount of voluntary deductible will be, the lower will be the amount of car insurance premium as the higher will be the discount too. The rate of discount applicable with voluntary deductible could be listed as:

(Source: The Insurance Regulatory and Development Authority of India (IRDAI))

Let’s understand the functionality of voluntary deductible with an example. Let’s assume that you have a claim amount of Rs. 20,000 and you have a car with an engine capacity of more than 1,500 cc, due to which an amount of Rs. 2,000 turns out as the compulsory deductible. In addition to this, you had selected a voluntary deductible amount of Rs. 2,500 at the time of purchasing a car insurance plan. Hence, during the time of claim, the expenses that would be borne by you are Rs. 2,000 + Rs. 2,500 = Rs. 4,500, while the insurance company will cover the rest of Rs. 15,500.

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Facts About Voluntary Deductible In Car Insurance

Here are some crucial points about the voluntary deductible in car insurance which may help you make informed decisions related to it and avail it in a better manner:

• Choose the Voluntary Deductible Wisely - Select the voluntary deductible just up to an amount which you can afford during the time of claim as then you will not be allowed to back out. The higher deductible will reduce your premium but it will increase the amount to be paid at the time of claim as well.
• More Useful for Responsible Drivers – The voluntary deductible is more beneficial for people who are excellent and skillful drivers. If you are a safe and alert driver, it will reduce the chances of any claim to a great extent, which will ultimately help you save money.
• Compulsory Deductible Is Not Eliminated - When a car insurance claim is raised, you will have to pay for both which includes the compulsory deductible as well as the voluntary deductible selected. In short, choosing a voluntary deductible will not prevent you from paying the compulsory deductible.

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Take Away

When you buy a car insurance plan, you should make an informed decision subject to the voluntary deductibles as it can help you save money but can also make you lose money if not chosen based on your budget and need. Being a sincere driver with a handsome income, you can easily pick higher voluntary deductibles to enjoy a lower premium. But, being a rash driver, it is advisable to avoid it or choose it with a lower amount.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.