Is Voluntary Deductible from Your Car Insurance Policy Worth it?

After you buy a car, the next thing you have to buy is insurance. It is a compulsion for everyone in India to buy motor insurance. When people buy four-wheeler insurance for their cars, they get the option of voluntary deductible that is very tempting to go for. Initially, it attracts insurance buyers to save on the premium. So, many insurance buyers avail this option too.

Is it good or it is bad? Let’s figure out.

Kinds of a Deductible in Car Insurance

First and foremost, let’s understand what voluntary deductible is. Deductibles are part of the total claim that an automobile owner is supposed to bear before the insurance provider pays his share. A four-wheeler insurance policy typically includes two kinds of such a deductible. First one is Compulsory Deductible and the second one is Voluntary Deductible.

Compulsory Deductible

According to the Insurance Regulatory and Development Authority (IRDA) guidelines, a compulsory deductible 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. If the engine potential is more than 1500 cc, the compulsory deduction is Rs. 2000; if it is less than 1500 cc, the compulsory deduction is Rs. 1000 only.

Voluntary Deductible

A voluntary deductible is the particular share of the claim that the vehicle owner will agree to pay voluntarily from his own pocket. If a person goes for the voluntary deductible, the premium drastically decreased. If one goes for high the voluntary deductible, then the car insurance premium will be synced accordingly.

In order to clearly understand the relationship between voluntary deductible and payable insurance premium, refer the following table:

Amount of Voluntary Deductible	Discount Percentage on the Premium
Rs. 2,500	20% on the own damage premium, subjected to a maximum amount of Rs. 750
Rs. 5,000	25% on the own damage premium, subjected to a maximum amount of Rs. 1,500
Rs. 7,500	30% on the own damage premium, subjected to a maximum amount of Rs. 2,000
Rs. 15,000	35% on the own damage premium, subjected to a maximum amount of Rs. 2,500

Some charges, including the cost of fiber and plastic parts, go beyond the coverage as per compulsory deductible and voluntary deductible. By default, the automobile owner is supposed to pay such charges from his own pocket.

For instance, a person has a car of 1000 cc engine capacity and he has selected voluntary deductible of Rs. 5000. He met with a minor accident. The repair charges are Rs. 15,000. In such scenario, the insurance company is bound to make the payment to the vehicle owner by the following calculations.

Total claim amount (A)	Rs.15,000
Consumable parts and components deduction (B)	Rs. 3,000
Compulsory deductible Amount (C)	Rs. 1,000
Voluntary deductible Amount (D)	Rs.5,000
Total payable claim amount A – (B+C+D)	Rs. 7,000

Since the vehicle owner has opted for the voluntary deductible, out of the total claim amount of Rs. 15,000, the insurance provider (as you can see) is liable to pay the amount of Rs. 7,000 only.

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.

You may like to Read: Third Party Liability Insurance

Wrapping it up

If you avail the voluntary deductible option, you might have to face the consequence(s) in the future. It adversely affects the claim settlement later on. It is better to resist the temptation of going for the voluntary deductible, as it turns out to be beneficial in the future.