When you start looking for a car insurance policy, you need to make many decisions. What is the type of policy that you want – third-party liability-only or comprehensive? If you are opting for a comprehensive plan, then you need to determine the IDV, add-on covers, and a range of other factors that impact the premium of the car insurance policy.
While it is tempting to opt for a plan that has the lowest premium, as a car owner, it is prudent to assess the deductible rate on four-wheeler insurance policies before signing the dotted line. There are two types of deductibles in car insurance – compulsory and voluntary. In this article, we will discuss deductibles in car insurance and compare these two types.
What are Deductibles in Car Insurance?
A deductible is an amount that the policyholder agrees to pay when he files a claim. So, if you file a claim for ₹20,000 and your four-wheeler insurance policy has a deductible of 20%, then the insurer will reimburse only ₹16,000, and you will have to bear the remaining ₹4000 from your pocket. Deductibles allow the insurer to reduce the premium of the 4 wheeler car insurance policy as the claim amount is reduced.
Understanding Compulsory and Voluntary Deductibles
The Insurance Regulatory and Development Authority of India (IRDAI) has made it mandatory for insurers to include a specified deductible in a car insurance policy. This is determined by the engine capacity of your car.
According to the mandate, insurers are required to have a compulsory deductible of ₹2,000 for private four-wheelers having an engine capacity of 1500cc and more. For private cars with an engine capacity of 1499cc or lower, the compulsory deductible is ₹1000. However, if the car is old, the insurer has the right to increase the compulsory car insurance deductible amount.
Most insurance providers allow car owners to choose a voluntary deductible in car insurance to reduce the premium of the plan. You can choose a deductible based on how much you are willing to pay from your pocket at the time of filing a claim.
Compulsory vs Voluntary Deductibles
| Compulsory Deductibles | Voluntary Deductibles |
| The IRDAI determines the compulsory deductible amount in car insurance based on the engine capacity of the vehicle. For old cars, the insurer can raise the compulsory deductible amount. | This is NOT a mandatory deductible. The policyholder can choose the voluntary deductible amount based on how much he is willing to pay at the time of filing a claim. |
| A compulsory deductible has no impact on the premium of the car insurance policy. | When you choose a voluntary deductible amount, it impacts the premium of the car insurance policy. A higher voluntary deductible implies a lower premium for the plan. |
| When you file a claim, you have to mandatorily pay the compulsory deductible specified by the insurer. | At the time of filing a claim, you have to pay the compulsory deductible plus the voluntary deductible as agreed by you. |
Importance of Deductibles
With a marked increase in the number of road accidents and mishaps, comprehensive car insurance policies are becoming essential. In fact, plans like a zero depreciation cover or bumper to bumper car insurance policy are gaining popularity since car owners are becoming increasingly aware of the rising costs of repairs and damages.
While the IRDAI has set a compulsory deductible to prevent policyholders from making frequent claims, a voluntary deductible is a tool that can help you receive a discount on the premium. However, this also lowers the claim amount in the future. Hence, it is important to assess this carefully before making a choice.
Summing Up
You cannot change the compulsory deductible in a car insurance policy. However, most insurers allow policyholders to choose a voluntary deductible amount to reduce the premium of the plan. The amount of voluntary deductible in car insurance is inversely proportional to the car insurance premium. Hence, a higher voluntary deductible amount results in a low premium for the car insurance policy.
However, this also means a lower claim settlement amount from the insurer. Hence, make sure that you consider all aspects carefully and avoid choosing a higher voluntary deductible purely to reduce the premium. Find the right balance and buy a cost-effective 4 wheeler car insurance plan for your beloved car. Good Luck!
