Motor insurance is a mandatory legal requirement, and no car owner is exempted from it. The Motor Vehicles Act of 1988 lays down this obligation wherein at least a third-party car insurance is the bare minimum car insurance cover. But third-party plans have limited coverage wherein only legal liabilities to third persons are covered by the insurance policy. There is no coverage for damages to your car. That’s when people prefer comprehensive policies. Comprehensive plans include third-party cover in addition to protection for damages to the policyholder’s car.
However, considering the myriad plans that are available, it often can be a bewildering experience for new buyers. It is mostly due to the jargon that makes it confusing for a layman to understand the policy terms. Among the different jargon used, the deductible is one such term.
What are deductibles in car insurance?
Deductibles, also known as excess in insurance, is a technical concept that is included in the insurance policy. Every car insurance requires you to pay a specified amount from your pocket when a claim is made. Thus, the amount that you, the policyholder, pays when making a claim is known as deductibles.
Deductibles are of two types—compulsory and voluntary deductible. As the name suggests, a compulsory deductible is mandatory which is determined by the regulator IRDAI and based on the cubic capacity of the vehicle. You can visit the official website of IRDAI for further details.
|Compulsory Deductible amount
|Not exceeding 1500 CC
|Exceeding 1500 CC
* Standard T&C Apply
On the other hand, voluntary deductibles are payable in addition to the compulsory deductible. Thus, there is an additional out-of-pocket expense over and above the compulsory deductible. If you believe you are a safe driver, such voluntary deductible can be used to further lower car insurance prices. However, you must remember while voluntary deductible lowers the premium amount, it increases the burden of contributing from your own pocket at the time of an insurance claim. Here’s how voluntary deductibles can be summarised:
|Amount of Voluntary deductible
|Impact on premium by way of concession
|20% of Own-damage premium limited to ₹750
|25% of Own-damage premium limited to ₹1,500
|30% of Own-damage premium limited to ₹2,000
|35% of Own-damage premium limited to ₹2,500
* Standard T&C Apply
How to manage deductibles in your car insurance policy?
While nothing can be done about the compulsory deductible, you cannot tinker with it. Contrary to that, the voluntary deductible is something you can increase or decrease based on which the premiums change and so does your contribution during a claim. Thus, choosing a higher voluntary deductible significantly lowers the insurance premium whereas it lowers the pay-out at the time of claim. Further, you have the flexibility to opt for different amounts of voluntary deductibles that allow a concession in your premium calculation as mentioned above. The downside to it is a sudden repayment that may be required in the event of a claim when repairs are required. * Standard T&C Apply
Thus, you must wisely manage the deductible of your policy based on your ability to pay for the repair costs. To estimate how many markdowns in insurance premiums are offered, you must look take the help of a car insurance calculator. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.