Insurance companies allow the policyholders to share a portion of the risk associated with the policy, which is referred to as a Deductible. They are an essential component of car insurance which can have a significantly high impact on your claim settlement as well as your premium. In order to get the best out of your car insurance coverage, it’s important to understand the concept of ‘Deductibles’ in detail. In simple terms, a deductible is a pre-determined amount that would be borne by the insured at the time of claim settlement. Therefore, when a claim arises, the insured will have to pay the deductible amount from his/her own pocket and the balance would be taken care of by the insurance company.
Here’s an illustration that will help you understand the concept of deductibles better; Let us assume you purchase a car insurance policy with a deductible amount of Rs. 2000. In case of a claim of Rs. 6,000, the insurance company would deduct Rs. 2000 (deductible) and settle the claim at Rs. 4000. However, to understand the concept of deductible better, it’s important to understand its components. There are two components of a deductible – Compulsory deductible and Voluntary Deductible.
A Compulsory deductible is a mandatory component of car insurance plan where the insured has no choice but to pay one part of the claim. As per the IRDAI rules, the compulsory deductible for a Car below 1500 CC is Rs 1500 and Rs 2000 for cars that have a Cubic Capacity exceeding 1500. A compulsory deductible doesn’t affect the premium or have any impact in lowering it, as the premium is calculated by considering other factors like IDV, make and model.
A Voluntary Deductible is an amount that you are willing to pay from your pocket as a part of the car insurance claim. Since you voluntarily opt to pay a part of the claim such as 10%, 20%, your premium gets lowered accordingly. The higher your voluntary deductible, the lower will be your premium. This discount is applied to the “Own Damage” part of your car insurance Premium. Additionally, a voluntary deductible instils a sense of responsibility while handling your car and is a joint pact between you and your insurer.
At the time of car insurance claim, both, the compulsory and voluntary deductible will be deducted from your final claim amount. Most importantly, the deductibles will be applicable to each claim.
Finally, the choice of opting for a voluntary deductible depends on how much confidence you have in yourself as a responsible driver. If you want to take minimum risks, you can completely forgo the voluntary deductible and pay the due premium. On the other hand, if you believe that you can drive responsibly, for the most part, choosing a voluntary deductible can be a sensible thing to do.
Now that you know everything about Compulsory and Voluntary deductibles, choose us for your car insurance needs and buy/renew your policy with Finserv MARKETS today!
“Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!”