You may be unaware of many things related to coverage and claims when it comes to insurance. It is important to understand your insurance policy thoroughly so that you are not distress during your claim. This is very true in the case of car insurance/vehicle insurance.
There is an important feature that has a significant impact on your claim settlement, i.e., “Deductible” or “Excess” in your car insurance policy. You must understand “deductible” in dept to get the best out of your car insurance coverage.
What is Deductible/Excess?
It is the amount an insured, i.e., you must pay in the event of the claim, and only after that insurance company will settle the remaining claim amount.
For instance, let’s say you have registered a claim for Rs 6000/-. If the deductible of the insurance policy is Rs 1000/-, the insurance company will pay Rs 5000/- as a part of claim settlement. But first, you have to pay remaining Rs 1000/- from your pocket.
The deductible is further classified into compulsory and voluntary excess.
Compulsory Excess
- Compulsory excess is made mandatory by IRDAI
- It is a fixed amount set by your car insurance company.
- This amount varies and depends on-
- Your car
- Your car’s engine capacity
- Your age
- You or your driver’s driving experience
- You can’t alter once compulsory excess is set by your insurer.
| Type of vehicles | Compulsory deductible |
| Vehicles not exceeding above 1500cc | Rs 1000/- |
| Vehicles exceeding above 1500cc | Rs 2000/- |
| Motorized vehicles | Rs 100/- |
However, the car insurance company can increase deductibility as your car gets old because there is a high chance of risk. Probability of claim rises with the increase in your car’s age.
So, before you buy vehicle insurance from any reputed insurance company, make sure you know your compulsory deductible.
Voluntary Excess
- Voluntary excess is optional for the insured.
- This amount will be paid by you in addition to the compulsory excess.
- It helps you reduce your premium amount, as voluntary excess is inversely proportional to the premium amount.
- Deciding this amount depends upon-
- Your budget
- Risk exposure
- If you are an experienced driver, then your car is exposed to limited risk. And going for a lower deductible will help you save on your vehicle insurance
- Make sure that you can afford in the event of a claim as car repairer won’t be able to return your car until the claim is paid.
- If you set a voluntary excess near or above your vehicle value, you may not be able to claim for any loss or damage to your vehicle as this may fall within the excess amount that is covered by you.
- You can’t reduce your voluntary excess during the term of the policy.
| Voluntary deductible | Discount |
| Rs 2500/- |
20% on own damage premium, subject to the maximum of Rs. 750/- |
| Rs 5000/- |
25% on own damage premium, subject to the maximum of Rs. 1500/- |
| Rs 7500/- |
30% on own damage premium, subject to the maximum of Rs. 2000/- |
| Rs 15000/- | 35% on own damage premium, subject to the maximum of Rs. 2500/- |
What to Choose and What Not To: A Buyer’s Dilemma
Compulsory excess is a mandatory but voluntary excess is like a gamble, as it helps you in the reduction of your premium amount, but at a higher bet. Don’t worry we can help you to get out of this dilemma; you need to be cautious and keep in mind points mentioned below-
- Don’t go for the high deductible as it may fetch you a steep discount on your premium amount but at a high cost. As you have to pay a large portion of claim amount yourself. So, go for the deductible amount that you can afford at any point in time.
- Sudden claims can be considered as a disadvantage of large deductibles as you need to come up with a high amount quickly at the time of claims.
- If you think you are an experienced driver and rarely can meet with an accident, you might take this risk.
- In case of a minor accident, your total excess might be equal or more than the actual cost of repairing of your car. In such cases, you have to decide whether it is worth claiming in your vehicle insurance at all.
- You should settle for a premium that suits your budget. Choosing one that takes a toll on your finances will result in you failing to make the renewal. Likewise, selecting a voluntary deductible requires some prudence – taking into consideration your finances.
It may be a tough task to choose the right deductible. The easy way to decide on the amount of voluntary deductible is to look at your budget for vehicle insurance premiums and your driving profile. Additionally, the deductible factor enforces a sense of discipline for car owners to drive more carefully and care about their car’s safety.
Drive safe, to be safe!