All About Compulsory & Voluntary Deductible in Car Insurance

A car is a valuable possession and hence buying an insurance policy to protect it from damages and untoward events is a must. However, there are many terms in car insurance that people are not completely aware of such as the claims process, coverage, third-party, etc. You must be aware of insurance jargon before purchasing a car insurance policy so that you don’t face any problems while filing an insurance claim. One such feature is called the ‘deductible’, which affects the claim settlement. Here’s a guide about the same so that you can get the maximum benefits out of your car insurance policy. Let’s say that you’re looking to buy car insurance online , in that case, it is essential to know exactly what a deductible is. During a claim, you have to pay a certain amount to the insurance company before your insurer provides compensation. This difference that you have to pay is known as the deductible. There are two types of deductibles: compulsory and voluntary. Let us understand both in detail.

What Are Deductibles in Car Insurance?

In car insurance, a deductible is the amount you must pay out of your own pocket before your insurer covers the remaining claim amount. The Insurance Regulatory and Development Authority of India (IRDAI) sets the deductible amount, which is typically determined based on your car's engine cubic capacity. There are two main types of deductibles in car insurance. Below, we’ll explore these types and how they affect your claim.

How Does a Car Insurance Deductible Work?

Unlike your premium, which is paid annually, the deductible is the amount you are required to pay out of pocket when making a claim. Once you pay the deductible, your insurer will cover the remaining repair or claim amount. For example, let's say you have a deductible of Rs. 1,000 and your car sustains Rs. 25,000 in covered damages:

1. The insurance company will pay Rs. 24,000 towards the repair cost.
2. You will need to pay the remaining Rs. 1,000 from your own pocket.

Please note, this example is simplified for illustration and does not factor in depreciation.

What Is a Compulsory Deductible in Car Insurance?

The Insurance Regulatory Development Authority of India (IRDAI) has made compulsory deductible mandatory under your car insurance policy. The amount depends on your car’s engine capacity and is fixed by your insurer. If your car is old, they might increase the deductible amount as your car is prone to more risk and danger and, thus, a higher chance of you filing a car insurance claim. Therefore, inquire and know your vehicle’s compulsory deductible amount before buying the policy. This type of deductible does not have any impact on your car insurance premium.

What Is a Voluntary Deductible in Car Insurance?

Unlike compulsory deductible, this one is optional. Along with the compulsory deductible, you can also choose to pay a voluntary deductible. You have the liberty of negotiating the voluntary deductible with your insurer. Remember that the voluntary deductible affects your car insurance premium. You must put thought into the amount and consider factors such as risk exposure, your budget, etc. If you’re sure that you won’t get involved in an accident or bump into things, another vehicle, or people, then opt for a higher deductible. This way, you would save on your car insurance premium . This feature helps car owners enforce discipline and instills a greater sense of responsibility when it comes to safety and handling their car. You can also call it a joint pact between your insurer and yourself. With this feature, you would think twice before raising a claim and win yourself concessions from NCB in car insurance . Purchasing a car insurance policy and adding this feature isn’t difficult and does not require you to be a tech-savvy either. All you need is a laptop or smartphone with an active internet connection and you’re good to go. Just visit the insurer’s website and fill in the necessary details. Once you’re done with the payment, you have a car insurance policy ready!

Compulsory Deductibles vs. Voluntary Deductibles

Compulsory Deductibles	Voluntary Deductibles
The amount of compulsory deductible is determined by the Insurance Regulatory and Development Authority of India (IRDAI) based on the vehicle’s engine capacity.	The amount of voluntary deductible is set by the policyholder and is not mandatory.
The compulsory deductible does not affect the car insurance premium.	The premium is inversely related to the amount of voluntary deductible — higher voluntary deductibles can lower the premium.
The policyholder only needs to pay the compulsory deductible amount when making a claim.	The policyholder must pay both the compulsory and voluntary deductible amounts in case of a claim.

Why Are Deductibles Important?

Motor insurance is essential for covering damages from accidents or collisions. Compulsory deductibles are set to prevent frequent claims and require the policyholder to pay a specific amount before the insurer covers the rest. This amount is not included in the premium but is paid when making a claim. Voluntary deductibles are amounts you choose to pay towards repairs or loss, allowing for a lower premium. The higher the voluntary deductible, the more significant the discount on the insurance premium, as it reduces the insurer’s risk.

When to Opt for a Deductible in Car Insurance?

Choose a voluntary deductible based on your comfort with risk and the potential claim amount. Higher deductibles reduce premiums but increase out-of-pocket costs.

1. For expensive cars, a smaller voluntary deductible can lower the premium.
2. Avoid raising small claims to preserve your No Claim Bonus (NCB). Opt for a deductible close to your repair costs to minimize unnecessary claims