Compulsory and Voluntary Excess In Motor Insurance

While buying or renewing a motor insurance policy, you might come across terms like compulsory and voluntary excess or deductibles. In motor insurance, the excess clause in insurance refers to the portion of a claim amount that the policyholder must pay before the insurer covers the remaining cost. It can either be compulsory for you or can be voluntarily opted for. Read on to know in detail about the compulsory and voluntary excess in motor insurance.Read more

What is Compulsory Excess in Motor Insurance?

All policies come with a compulsory excess clause. Compulsory deductible or excess for car insurance, or any motor insurance, is the amount that is mandatorily deducted by insurance companies on each and every claim you file. It is a fixed amount that depends on the engine capacity of the insured vehicle.

Since it is mandatory, it does not influence your premium choice directly, but it determines the minimum amount you must bear during a claim settlement. For instance, car insurance companies pay the claim amount only after deducting the compulsory excess while settling a car insurance claim.

Here is the compulsory deductible with a motor insurance policy as per your vehicle engine and type:

What is Voluntary Excess in Motor Insurance?

Voluntary deductible or voluntary excess in insurance is an optional amount that a policyholder chooses to pay in addition to the compulsory excess when buying or renewing motor insurance. The higher the voluntary deductible, the higher your own-damage (OD) premium discount, as you agree to take on more financial responsibility while settling a claim.

Here is how much discount insurers offer based on your voluntary deductible:

Compulsory Excess vs Voluntary Excess

How Does Compulsory Excess and Voluntary Excess Impact Motor Insurance Premium?

The compulsory excess or compulsory deductible does not impact your motor insurance premium because it is standard across policies and is based on your vehicle type. However, voluntary excess or voluntary deductible directly impacts your premium.

When you opt for a higher voluntary excess, the insurer's liability reduces, which lowers your own-damage premium. It does not impact your third-party premium as it is decided by the Insurance Regulatory and Development Authority of India (IRDAI) based on the cubic capacity of your vehicle.

Therefore, only voluntary deductibles help you reduce your premium. However, this results in increasing your out-of-pocket expenses when you file a claim.

Is it Important to Opt for a Compulsory and Voluntary Excess?

A compulsory excess or deductible is unavoidable and every policyholder automatically has to pay it. On the other hand, the choice to opt for a voluntary excess is with the policyholder.

Opting for voluntary excess can be beneficial if you:

• Have a strong claim-free driving history
• Want to reduce your premium amount
• Can comfortably pay a higher amount yourself during claims

However, it may not be suitable if you prefer minimal out-of-pocket expenses or frequently drive in high-risk areas.

What is Co-Payment in Motor Insurance?

Co-payment is a different term and not related to compulsory and voluntary excess in motor insurance. An excess or deductible is a fixed amount you pay for a claim, whereas, co-payment is a percentage of the claim amount that you must pay. For example, with a 10% co-pay on a ₹20,000 claim, you pay ₹2,000, and the insurer pays the rest. Some policies include co-payment clauses for specific cases, such as older vehicles or certain add-ons.

Wrapping Up

Both compulsory excess and voluntary excess are essential terms of the excess clause in motor insurance policies. Compulsory excess is fixed and mandatory, while voluntary excess is optional and helps reduce premiums. Choosing the right voluntary excess depends on your driving habits, financial comfort, and willingness to share claim costs. Understanding these concepts ensures you select a policy that balances affordability with adequate protection.