All About Compulsory and Voluntary Deductible in Car Insurance

Understanding deductibles in car insurance is the key to saving money and making better choices about your policy. A deductible is the amount you have to pay out of your own pocket before your insurance company pays for the rest of the claim. There are two kinds: mandatory (set by IRDAI) and optional (chosen by you).

Selecting the right voluntary deductible can lower your premium while keeping your out-of-pocket costs in check. Read on to find out what are deductibles in car insurance, how different types of deductibles affect your car insurance coverage and more.

What are Deductibles and How is It Important in Car Insurance?

Deductibles in car insurance refer to the out-of-pocket amount you must pay before your insurer covers the remaining claim cost. It represents your share of responsibility in a claim. In car insurance, the deductible is calculated per claim.

Let us look at an example to understand deductibles in car insurance meaning.

Suppose your Bajaj General Insurance comprehensive car insurance policy includes a ₹5,000 deductible and your car sustains ₹15,000 worth of damage. You will pay ₹5,000, and Bajaj General Insurance will cover the remaining ₹10,000.

Moreover, this aspect is essential in a car insurance policy since:

1. Depreciation Note: Depreciation is applied separately to car parts such as nylon, rubber, plastic, and airbags, and the rate varies based on the age of the parts.

2. Voluntary Deductible Benefit: The higher your voluntary deductible, the lower your insurance premium becomes. This helps reduce overall policy costs but increases the amount you will pay for repairs.

3. Choosing the Right Deductible: Select a deductible amount that aligns with your budget and comfort level. A very high deductible can strain your finances during a claim, while a balanced deductible ensures affordable premiums without excessive out-of-pocket expenses.

Also Read: Global NCAP Safety Rating For Toyota Taisor

What is Compulsory Deductible in Car Insurance?

Compulsory deductible, also commonly known as a "Standard Deductible," is a fixed amount IRDAI sets and applicable across all own-damage claims. Here are the compulsory deductible values, mandatory to pay during the claim:

1. For private car (up to 1500cc) - ₹1,000

2. For private car (above 1500cc) - ₹2,000

3. For a two-wheeler car (not considering cc) - ₹100

If your car is older, the insurer might charge a higher deductible and consider cars with higher cubic capacities to be a higher risk of claim. The premium amount cannot be lowered for compulsory deductibles. In such cases, the premium is calculated based on factors such as the car's make and model, IDV, and other factors.

What is a Voluntary Deductible in Car Insurance?

A voluntary deductible in car insurance is an optional amount you agree to pay in addition to the compulsory deductible set by IRDAI. This applies to every claim you make on your car insurance policy.

1. By choosing a higher voluntary deductible, you can lower your premium amount. However, it also means you will need to pay more out of pocket whenever a claim arises.

2. The voluntary deductible directly influences your car insurance premium. Therefore, before finalising the amount, it is essential to assess your budget, risk exposure, and driving habits.

3. For instance, if you are a safe driver who rarely makes claims, opting for a low voluntary deductible may be ideal, as it minimises out-of-pocket costs.

4. Conversely, if you live in an accident-prone area or face frequent driving risks, selecting a higher deductible can significantly reduce your premium costs while balancing overall expenses.

Here is an example to look into:

Suppose you choose a ₹4,000 voluntary deductible along with a ₹1,000 compulsory deductible. If your repair cost totals ₹10,000, you will pay ₹5,000, and your insurer will cover the remaining ₹5,000.

Understanding this balance is crucial when comparing policies and making informed decisions about car insurance deductibles.

How Do Deductibles Work With Different Car Insurance Types?

There are three main types of car insurance in India: Third-Party Insurance, Comprehensive Insurance, and Standalone Own Damage (OD) Insurance.  When it comes to deductibles, each one works differently. 

Let us look at some examples to see how they work with each type of policy:

1. Comprehensive Car Insurance

- This policy has both required and optional deductibles.

- Deductibles are significant in determining how much a claim is worth, because complete coverage pays for damage to your own car and for third-party liability.

- If your car repair bill is ₹15,000 and you have a ₹1,000 mandatory and ₹3,000 optional deductible, you will pay ₹4,000, and the insurance company will pay ₹11,000.

2. Third-Party Car Insurance

 This type of policy does not have any deductibles.

- This insurance only pays for damage, injury, or death that your car causes to someone else.

- For example, if your car damages someone else's property worth ₹50,000, your insurance company will pay the full amount without a deductible.

3. Standalone Own Damage (OD) Insurance

- You can choose between mandatory and optional deductibles.

- It covers damage or loss to your car from theft, fire, natural disasters, or accidents, but not damage or loss caused by someone else.

- If the repair costs ₹12,000 and your total deductible is ₹2,500, you will pay ₹2,500, and your insurance company will pay ₹9,500.

Also Read: HSRP Number Plate in Haryana

Key Differences Between Compulsory and Voluntary Deductibles in Car Insurance

Check the table below to get a detailed insight into compulsory vs. voluntary deductibles in car insurance policy:

Also Read: Driving Licence in Bangalore: How to apply online/offline?

When to Choose Deductibles in Car Insurance?

Once you choose a comprehensive car insurance policy with add-ons such as zero depreciation cover, roadside assistance, and personal belongings coverage, consider car insurance deductibles to strike the right balance between claims and costs. Selecting the right type of car insurance deductible can reduce the premium amount while being financially prepared for car repair costs.

Choose a voluntary deductible only under the following circumstances:

1. Have a solid fund during an emergency: A higher deductible amount means you need to spend more out of pocket during a claim. This is manageable, however, if you already have a budget.

2. Have a good driving history: If you have a history of filing a few claims, opting for a voluntary deductible can lower your annual premium.

3. You are the owner of a high-value car: If you have an expensive car, the premium will be higher. Thus, choosing a voluntary deductible offsets these costs while you renew car insurance.

Bajaj General Insurance motor insurance policies provide premium discounts on the voluntary deductible amount. This, however, depends entirely on the type of deductible chosen. Choosing the right deductible amount helps in balancing savings and financial health. Thus, before deciding on the deductible amount, make sure to look into your driving habits.

Bottom Line

Understanding the difference between compulsory and voluntary deductibles helps balance savings and out-of-pocket expenses. While IRDAI fixes the compulsory deductible, the voluntary one lets you control your premium. For instance, with Bajaj General Insurance, you can earn a 20%-30% premium discount. Always choose an affordable deductible for car insurance and compare car insurance policies online to find the best coverage and maximise your savings.

Frequently Asked Questions

What might happen if I lodge a claim, but the repair expenses are less than my deductible?

If your car repair expenses are less than the deductibles, you will be solely responsible for making payment of your car repair costs. In this case, you will not receive financial support from the insurer.

Am I eligible to opt out of compulsory deductibles in car insurance?

No, it is not possible to opt out of compulsory deductibles in car insurance. The Insurance Regulatory and Development Authority of India mandates the selection of a mandatory car insurance deductible.

When should I pay my car insurance deductible?

You should pay the car insurance deductible upon approval of the claim. Making this payment is necessary to cover any additional damage expenses.

Can I claim my car insurance deductible on taxes?

In India, if you use your vehicle for personal purposes, you are eligible to claim the car insurance deductible amount as a tax deduction. However, if you use the car for business purposes, the car insurance premium is deductible as a business expense under the applicable tax rules.

Which vehicles in India must opt for a compulsory deductible?

In India, all insured private cars must opt for a compulsory deductible, as mandated by IRDAI. The deductible amount is ₹1,000 for a 1500cc car and ₹2,000 for cars above that size. This deductible applies to all own-damage car insurance claims.

Can I get back the money I paid for a deductible?

No, you won't get a money refund from the car insurance deductible. The deductible is the portion you ought to pay before the insurer settles the claim.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.