What Is Voluntary Deductible In Car Insurance?

 Buying car insurance is a non-negotiable aspect for car owners. Any insurance - be it vehicle or health, is a cornerstone of a healthy financial profile. It ensures legal compliance with the traffic laws, there is financial security and if you have opted for add-on coverage, then owning a vehicle becomes a cakewalk. One of the biggest challenges faced by prospective car insurance buyers while buying car insurance is finding ways to avail a premium discount. To be able to do so, it is important to understand the factors that affect an insurance premium. One of these factors is a voluntary deductible. This article will teach you what a deductible is and how voluntary deductibles influence your car insurance premium payments.

What Is Deductible In Car Insurance?

Deductibles are basically the amount of money that a beneficiary has to pay out-of-pocket while filing an insurance claim. There are two types of deductibles in car insurance – Compulsory deductible and Voluntary deductible. Deductibles are divided into different categories on the basis of several factors, however, the primary factor that matters is a car engine’s volume. The higher the CC, the bigger the car insurance premium amount. 

What Is A Compulsory Deductible?

A compulsory deductible is one of the out-of-pocket expenses borne by policyholders while filing a claim. This is a mandatory part of car insurance policies. Compulsory deductibles help insurance companies reduce the number of smaller claims, specifically those which can be taken care of by policyholders. For example, if you incur a bill of Rs. 25000 on your annual car maintenance and your policy dictates you to pay a compulsory deductible of Rs. 5000, you are liable to pay the amount. Compulsory deductible terms and conditions depend on the insurance company, their policies on compulsory deductibles and the different features of the vehicle being insured.

What Is A Voluntary Deductible?

A voluntary deductible essentially refers to the money that insurance holders pay out of their pockets voluntarily to reduce the car insurance premium amount. One of the primary benefits of opting for a voluntary deductible is that it brings down your car insurance premium, significantly. A Voluntary Deductible enables beneficiaries to significantly cut down on their insurance premium payments. 

The exact slabs for voluntary deductible varies depending on the insurance companies and their policies, however, as per IRDAI rules, here is a general list of voluntary deductible slabs for privately owned vehicles.

Benefits of Choosing a Voluntary Deductible For Car Insurance Premium

A Voluntary deductible or voluntary excess is part of car insurance policy scheme that requires policyholders to pay a portion of the insurance claim money from their pockets. As the term explains, this is a voluntary deductible. When policyholders volunteer to pay this money, insurance companies offer heavy discounts on their premium payments. Offering to do a voluntary deductible can be beneficial in lowering your insurance premium rates significantly. Different insurance providers have different terms and conditions regarding voluntary deductibles. Although it depends on the policyholders how much they would like to pay as Voluntary Deductible, here is a rough estimate of the different payment slabs and insurance premium discounts.

The Voluntary Deductible amount is variable and differs from one insurance provider to another. However, opting for a higher voluntary deductible can fetch premium discounts, thus benefitting you in the long run. 

Common Voluntary Deductible Slabs for Private Vehicles

Motor insurance policies are revised every year by insurance companies. However, when prospective buyers agree to pay voluntary deductibles, it enables them to avail of premium discounts. 

One of the benefits of paying voluntary excess is that insurance holders get higher premium discounts. However, there are risks associated with it.

What Are The Risks Of Availing Voluntary Excess?

Higher Out-Of-Pocket Expenses

One of the major goals behind purchasing a car insurance is to reduce the out-of-pocket expenses at the time of accidents and easy repair costs. When you opt for higher voluntary deductibles, car insurance companies offer attractive discounts on premium rates, however, there can be higher out-of-pocket costs which can be detrimental to your financial stability in the long run.

It Is Not Ideal For Frequent Claims

If you need the help of your insurance policy to claim minor repairs and are prone to minor accidents, you may end up spending more than you intended with a voluntary deductible. Hence, if you are someone who frequently tends to rely on your claim money for repairs and damages then you must reconsider the option to agree for voluntary deductible.

Choosing the Right Voluntary Deductible Amount

When deciding on an appropriate voluntary deductible amount, consider the following factors:

• Financial Situation: Assess your financial stability and how much you can afford to pay out-of-pocket if an accident occurs.
• Driving Habits: If you have a clean driving record and rarely file claims, opting for a higher voluntary deductible may be beneficial.
• Insurance Premium Savings: Calculate potential savings on premiums based on different voluntary deductible amounts to find an optimal balance between premium costs and potential out-of-pocket expenses.
• Vehicle Usage: Consider how often and where you drive your vehicle; frequent driving in high-risk areas might warrant a lower voluntary deductible for added peace of mind.

Conclusion

In summary, understanding what a voluntary deductible is and how it functions within car insurance policies is crucial for making informed decisions about coverage options. By choosing an appropriate level of voluntary deductible based on personal circumstances and risk tolerance, policyholders can optimize their insurance premiums while ensuring adequate financial protection against unforeseen events.