Voluntary Deductible in Car Insurance

Compulsory Deductible	Voluntary Deductible
The compulsory deductible is applicable to all policyholders and their vehicles. It is determined based on the four-wheeler’s engine potential. The Indian Motor Vehicle Act provides a basis for setting the rates: they can range from ₹1000-₹2000 depending on engine potential.	The policyholder agrees to pay a certain amount to cover damage repairs from their own pocket, this is known as the voluntary deductible. The higher the voluntary deductible, the lower the premium on car insurance.
This is applicable only for comprehensive car insurance and has no effect on your car insurance premium.	A higher voluntary deductible can decrease your car insurance premium.
According to IRDAI, the compulsory deductible will depend upon the cubic capacity of your car.	Your voluntary deductible will depend upon your payment capacity.

What is Voluntary Deductible?

The option of voluntary deductible can be availed at the time of buying car insurance.

 

In the event of a collision or accident, where the policyholder’s vehicle is damaged, the policy shows that the insured has agreed to pay a certain amount to cover the damages from their own funds. The primary advantage of this is the voluntary deductible discount on premium. The greater the voluntary deductible amount, the greater the discount on the premium. For instance, for a voluntary deductible of Rs. 2500, the discount percentage is typically 20% on the own damage premium, with the upper limit of Rs. 750. For a deductible amount of Rs. 5000, the discount on premium goes up to 25%.

 

Moreover, some charges such as repairs of plastic or fiber parts, are separate from compulsory or voluntary deductible and are expected to be paid by the insured. Note that a downside of voluntary deductible is the insured having to bear the majority of repair costs, thus defeating the main purpose of buying car insurance.

Common Misunderstandings about Voluntary Deductible

Many people have certain misconceptions about voluntary deductibles; a few common ones are:

 

• Pointless investment

Drivers who are confident in their driving skills and do not find future mishaps are very likely, hesitate to go for voluntary deductibles as it may feel like a useless upfront payment. However, the upfront payment can actually be beneficial for experienced as well as new drivers, in case of unexpected accidents or in the form of discounted premium.

 

• Conflating Co-pay and Voluntary Deductible

Some may confuse one for the other, but co-pay is different from the voluntary deductible. The former is a division of the final claim amount between the insurer and the insured. Meanwhile the latter is an initial payment made by the insured at the time of filing a claim.

 

• No-Claim Bonus is the same as Voluntary Deductible

No-claim bonus sometimes gets confused with the voluntary deductible, as it can also help you get a discount on premium. The no-claim bonus is awarded to the policyholder if they have not filed any claims in a given year, in the form of a discount on premium for the next year. This discount can go on increasing in subsequent years that also have no claims. On the other hand, the voluntary deductible discount is brought into effect only at the time of purchasing the policy.

Conclusion

Thorough research is imperative in order to make an informed decision that will provide you with the best possible protection. Assess your financial status, vehicle features, and the policy clauses, provisions and add-ons before confirming policy purchase. Reading the documents carefully can help you avoid any hitches at the time of filing a claim. While voluntary deductibles have certain advantages, they may also affect the claim settlement procedure adversely. Hence, if you want to ensure that claim settlement goes smoothly, know your priorities and the policy limitations before purchasing one.