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How deductibles impact your insurance premium

By Finserv MARKETS - Sep 12,2019
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How Deductibles Impact Your Insurance Premium

Aritra was already having the worst Monday when her car met with an accident while driving back home, after a terribly long day at work. After a few deep breaths, she decided not to panic because thankfully, her car was insured. The card didn’t look too damaged and her motor insurance would pay for the repairs. She was pleased with herself for taking a comprehensive motor vehicle insurance online as it was the end of the month and paying for the repairs would have left her in a difficult spot.

She came back home and talked to her friend about the accident and how she was going to file a claim to pay for the repairs. To Aritra’s dismay, her friend suggested that she pay the bill from her own pocket instead of filing for a claim. As the car wasn’t badly damaged, it wouldn’t cost her a substantial amount of money. Aritra was now in a dilemma.

She had taken Bajaj Allianz Motor Insurance available on Finserv MARKETS, a good and comprehensive motor vehicle insurance in the market and thought that she should definitely make the best of it. But she was also worried about the side effects. Was it going to impact her claim history? Renewal premiums? Aritra was totally confused.

This is a very common confusion among car owners who have taken a motor vehicle insurance. Now, to quench that curiosity, there is no hard and fast rule for filing a claim. But it is important to know some important facts when making such a decision.

To begin with, familiarize yourself with the concept of deductibles that has a big role in claim settlements. To understand deductibles in motor insurance easily, imagine this. A little girl wanted a bicycle but her parents were reluctant. After a few theatrics, the child got her way as usual, but on one condition. If she wasn’t responsible with it and got it damaged, they would deduct the cost of repairs from her pocket money. Hesitantly, the child agreed and was more careful and responsible toward her bicycle in the future. The deduction from that little girl’s pocket money is what deductibles in motor vehicle insurance stand for.

Now, there are 2 types of deductibles in motor insurance

The compulsory deductible: This has been made mandatory in motor insurance by the Insurance Regulatory Development Authority of India (IRDAI). Here, the insured person has no choice but to pay a part of the claim. A compulsory deductible is a fixed amount set by the motor insurance company that is determined by the engine capacity of your car. For instance, the compulsory deductible for a car not exceeding 1500cc is Rs. 1,000 and for those exceeding this capacity, the deductible is Rs. 2,000.

It is important to note here that if your car is old, your motor insurance company can increase this deductible. This is because, with older cars, the risk and the probability of claims are also high. Therefore, it is crucial to know what is the compulsory deductible in your motor insurance.

Voluntary deductible: A self-defining term, this deductible is optional for you and you may choose whether or not to opt for it. However, this is also a clause that requires all the seriousness because this is paid in addition to the compulsory deductible. While the compulsory deductible does not affect your car premium, the voluntary deductible has an inversely proportional relationship with it. Therefore, deciding this amount is a balancing act. You must take into consideration your budget, risk exposure, and other factors. When deciding for this deductible, evaluate your driving skills and how much of a risk is your car exposed to on the road. If you are confident that your car is relatively safer, opt for a low deductible which in turn, will help you save on your motor insurance premiums.

In case of a claim, only the balance after subtracting the deductible amount is payable, that too after considering other factors like depreciation. Therefore, it is not prudent to claim small amounts which are close to or less than the deductible amount specified in your motor insurance policy.

Considering the risks that you and your car are exposed to on the road, it is always wise to choose a comprehensive motor insurance policy. Consider buying a policy from Bajaj Allianz Motor Insurance, available on Finserv MARKETS, to get access to industry-leading service and customer care.

Head to Finserv MARKETS to read about add on covers in motor insurance.

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522