Voluntary Deductible in Car Insurance

What is a Deductible?

Let us first understand what a deductible is. The amount an insured must pay out of their pocket before proceeding with a claim or reimbursement is a deductible. For example,

If Aman files a claim worth Rs. 20,000 and his deductible is Rs. 2,000 then his insurer will deduct Rs. 2,000 from the total amount and pay him Rs. 18,000 for car damages.

Types of Deductible in Car Insurance

A four-wheeler insurance policy includes two kinds of deductible:

Compulsory Deductible

This is a mandatory deductible that must be paid by the insured. The rates are fixed by the insurance company and entirely depends upon the engine potential of the four-wheeler.

The rates are set for the private four-wheelers according to the Indian Motor Vehicle Act:

• Cars with engine potential over 1500 cc: Rs. 2000;
• Cars with engine potential less than 1500 cc: Rs. 1000

Voluntary Deductible

A voluntary deductible is the particular share of the claim that the vehicle owner will agree to pay voluntarily from their pocket. If one goes for a higher voluntary deductible, then the car insurance premium will be decreased significantly.

Learn more about the voluntary deductible and its impact on the payable insurance premium through the following table:

Is Voluntary Deductible Beneficial?

Voluntary deductible is a great way to reduce the premium of comprehensive car insurance. However, the insured must consider some factors before opting for it. The main aim is to save money, but if the insured end up paying more than they are saving then this deductible won’t serve its purpose.

Some charges, including the cost of fibre and plastic parts, go beyond the coverage as per compulsory deductible and voluntary deductible. By default, the policyholder is supposed to shoulder this amount on their own.

For example:

For instance, a person has a car of 1000 cc engine capacity and has selected a voluntary deductible of Rs. 5000. After a minor accident, the repair charges amount to Rs. 15,000. In such a scenario, the insurance company will make the claim/reimbursement payment by the following calculations:

Since the vehicle owner opted for a voluntary deductible worth Rs. 5,000, out of the total claim amount of Rs. 15,000, their insurer is only liable to pay Rs. 7,000.

In this case, more than half of the cost falls on the shoulders of the vehicle owner. The basic goal of buying car insurance in the first place is not met.

Difference Between Compulsory Deductible and Voluntary Deductible

Also known as compulsory excess and voluntary excess, the differences between these two types of deductibles have been listed below:

Voluntary Excess in Car Insurance: How Does It Work?

Voluntary deductible or voluntary excess works as follows:

• The policyholder must inform the insurer about their choice to opt for VD while buying or renewing their motor insurance
• The insurer will then discuss the VD amount
• The payable premium will be calculated as per the finalized VD
• Once everything is discussed, the insured can buy the policy
• When a claim arises, the policyholder must pay the fixed VD to settle the claim