Buying a car insurance policy can be tricky. You are expected to take various decisions while buying a car insurance. For this, you will have to dedicate a bit of your time and effort so that the decision doesn’t go wrong. There are different motor insurance companies in India that provide motor insurance, so choosing the best out of them is quite a task. But that is not the only call you need to take. Right from choosing a right car insurance provider to choosing a suitable car insurance policy, looking for some add-ons to declaring IDV, there is much to do.
One of the key aspects to keep in mind when you buy a car insurance policy is to decide on the deductibles. Here, we aim to make you aware everything about deductibles in car insurance.
What is Car Insurance Deductible?
Your car insurance deductible is the amount that you bear out of your own pocket for the damages that happened to your car due to an accident before your insurance provider pays. In other words, a car insurance deductible is the sum of money that you pay toward the damage repair before your insurance provider pays rest of the amount.
It can be understood with the help of an example. If the cost of damage to your car is Rs. 10,000/- and your deductible is Rs. 4,000/-, you will only have to pay Rs. 4000/- as a repair cost and your insurance company will pay the remaining Rs. 6000/-.
Types of Deductibles in Car Insurance
There are two types of deductibles when you buy car insurance policy:
1. Compulsory Deductible
2. Voluntary Deductible
Let us get to know about them one by one.
Compulsory Deductible Car Insurance
Compulsory deductible is an amount that is fixed by the insurance company. It is a sum that must be borne by the policyholder in the instance of a claim. According to the Insurance Regulatory and Development Authority of India’s(IRDAI) rules, the amount of Compulsory Deductible can be between Rs.50/-(two-wheelers) to Rs.1000/-(four-wheelers).
Compulsory deductible for cars less than 1500cc is Rs. 1000/-, and Compulsory deductible for cars above 1500cc is Rs.2000. At the time of claim, this amount is reduced from the claim amount before the company reimburses or sanctions the cashless claim.
It depends on the insurer to decide the compulsory deductible. Do note that the compulsory deductible may attract a higher amount if the car is older and has more potential claim instances. Cars with larger cubic capacities also have a higher compulsory deductible. Also, in compulsory deductibles, the premium is not reduced and is decided on the basis of general factors like model, coverage, and IDV etc.
Voluntary Deductible Car Insurance
As the name says, in this type of deductible, the policyholder chooses his own limit to bear a part of the expense and pays from his own pocket before registering a claim to the insurance provider. The policyholder chooses his voluntary deductible amount on the basis of his affordability and risk factor. If the policyholder chooses a higher amount of Voluntary Deductible, it will lead to a lower premium.
In the case of a compulsory deductible, the policyholder needs to pay only the compulsory deductible which is low, at the time of claim. In the case of a voluntary deductible, the policyholder pays both the compulsory deductible and the voluntary deductible that he chooses out of his own will, which is higher in amount.
Here is a table that explains the relation between the voluntary deductible and insurance premium:
|Voluntary Deductible Amount||Percentage Discount on the Premium|
|Rs. 2500/-||20% on the OD premium on max amt of 750/-|
|Rs. 5000/-||25% on the OD premium on max amt of 1500/-|
|Rs. 7500/-||30% on the OD premium on max amt of 2000/-|
|Rs.15000/-||35% on the OD premium on max amt of 2500/-|
Before selecting a voluntary deductible amount, the person should also know that some charges like the cost of fibre and plastic parts fall into the category of consumable parts that cannot be claimed as they are not part of the car insurance policy coverage. This means that the cost of any repairs of these parts will also have to be borne from the pocket of the policyholder. Hence, the voluntary deductible amount should be carefully thought before declaring to the insurer.
Why is Car Insurance Deductible Important?
Deductibles are available in comprehensive car insurance coverage policies. It is intended to lower the number of claims. The compulsory deductibles allow the policyholders to let go of the small amount claims as they bear the expense themselves. The compulsory deductible also makes sure that the drivers drive more meticulously since they would have to pay for at least some amount towards any damage.
Therefore, these deductibles are a good way to save money. If you choose a high car insurance deductible, it will lower your insurance premium amount. Responsible drivers who are sure of their driving skills may opt for a voluntary deductible to save further on the premium.
How much Deductible should you Choose?
Choosing your car insurance deductible amount should be on the basis of how much you can afford. If you chose a higher amount than you can afford, then at the time of a car accident, you may not have enough money to cover the deductible. The things that may be considered are your salary, your savings, your budget, and your credit amount.