Difference between Compulsory and Voluntary Deductible in car insurance

Buying car insurance can be cumbersome, especially, if you are not aware of certain jargons or technical terms particular to car insurance policy. For example, many customers are puzzled when they come across words like compulsory deductible or voluntary deductible or car insurance excess while buying car insurance online. However, understanding these terms is important as it enables the customers to understand the quantum and extent of risk they have to bear associated with the car insurance plan they have bought.

Understanding Compulsory Deductibles in Car Insurance

Car insurance is bought to financially secure against damages caused by theft or accident to the car. However, some car insurance companies mandate their customers to bear a part of the claim from their own pockets. The rate is fixed at Rs. 1000 for cars with engine capacity limited to 1500 CC and Rs 2000 for cars whose engine capacity exceed 1500 CC. Many car insurance companies in India include this concept also, called “mandatory excess” to discourage their customers from making small claims, and thus, enforce safe driving habits.

Understanding Voluntary Deductibles in Car Insurance

There is another side to the car insurance excess, called the voluntary excess or the voluntary deductible, that the insured needs to opt for. Unlike the mandatory excess, the voluntary deductible is part of the claim that the customers agree to pay from their pockets over and above the compulsory deductible amount.

Many customers question the validity of including the concept of voluntary deductible in addition to the existing compulsory deductible applicable to car insurance. The answer is simple, since, customers look for ways to reduce their car insurance premiums, opting to pay voluntary deductibles helps lower the policy premium amount. The greater the amount of voluntary deductible opted for, the more the discount available on the car insurance premium.

Starting from the basic voluntary deductible limit of Rs 2500, customers can opt to pay to the tune of Rs 15000 voluntary deductible amount to seek heavy discounts on car insurance prices. The best part of choosing the voluntary excess amount is that customers can choose the amount based on their needs and budgetary restrictions.

Choosing a higher voluntary deductible refrains customers from making frivolous claims towards damage repairs. The customers also benefit by paying premiums lower than what the insurance company charges.

Compulsory Deductible vs. Voluntary Deductible in Car Insurance

Here's the difference between Compulsory deductible and Voluntary deductible:

• Flexibility: The amount of money that a person pays in the form of compulsory deductible in car insurance is defined by the IRDAI but voluntary deductible is set by the individual and hence gives you more flexibility.
• Savings: Compulsory deductibles don't help in money saving as they are set by IRDAI. However, Voluntary deductibles can help you save if chosen smartly.
• Relation with Premium: While the Compulsory deductible does not affect the premium, voluntary deductible has a direct impact and it does affect the premium.

Do Car Insurance Deductibles help?

Choosing a higher amount of compulsory and voluntary car deductibles ensures lower premium charges in the long run. However, the benefits also depend on the nature and frequency of claims made on the insurance bought.

Those driving for the first time on the roads must prefer to choose a lower voluntary deductible amount. However, the more adept and experienced drivers who swear by their immaculate driving skills can take the risk of opting for higher voluntary deductibles as the chances of them meeting with accidents are relatively low.

Before choosing to pay the compulsory deductible or voluntary deductible, it is important to understand how they can affect your premiums in the long run. After all, opting for the right car insurance premium is akin to making sound financial planning.