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Deductibles in Car Insurance

Buying car insurance goes hand in hand with buying a car; mandated in India, it provides much-needed protection against unforeseen circumstances. Deductibles or voluntary deductibles are terms that are commonly associated with car insurance. Voluntary deductible in car insurance, meaning the amount that the policyholder has agreed to pay in the event the vehicle gets damaged and requires repairs, is an option provided at the time of policy purchase. This may attract insurers as it can help reduce the premium on the insurance. However, it is important to know the necessary details before opting for voluntary deductible in car insurance.

Types of Deductibles in Car Insurance

Deductibles constitute the amount from the total claim that has to be paid by the insured before the insurer pays the assured amount.


There are two main types of deductibles in car insurance.

Compulsory Deductible

Voluntary Deductible

The compulsory deductible is applicable to all policyholders and their vehicles. It is determined based on the four-wheeler’s engine potential. The Indian Motor Vehicle Act provides a basis for setting the rates: they can range from ₹1000-₹2000 depending on engine potential.

The policyholder agrees to pay a certain amount to cover damage repairs from their own pocket, this is known as the voluntary deductible. The higher the voluntary deductible, the lower the premium on car insurance.

This is applicable only for comprehensive car insurance and has no effect on your car insurance premium.

A higher voluntary deductible can decrease your car insurance premium. 

According to IRDAI, the compulsory deductible will depend upon the cubic capacity of your car.

Your voluntary deductible will depend upon your payment capacity.

What is Voluntary Deductible?

The option of voluntary deductible can be availed at the time of buying car insurance.


In the event of a collision or accident, where the policyholder’s vehicle is damaged, the policy shows that the insured has agreed to pay a certain amount to cover the damages from their own funds. The primary advantage of this is the voluntary deductible discount on premium. The greater the voluntary deductible amount, the greater the discount on the premium. For instance, for a voluntary deductible of Rs. 2500, the discount percentage is typically 20% on the own damage premium, with the upper limit of Rs. 750. For a deductible amount of Rs. 5000, the discount on premium goes up to 25%.


Moreover, some charges such as repairs of plastic or fiber parts, are separate from compulsory or voluntary deductible and are expected to be paid by the insured. Note that a downside of voluntary deductible is the insured having to bear the majority of repair costs, thus defeating the main purpose of buying car insurance.

Common Misunderstandings about Voluntary Deductible

Many people have certain misconceptions about voluntary deductibles; a few common ones are:


  • Pointless investment

Drivers who are confident in their driving skills and do not find future mishaps are very likely, hesitate to go for voluntary deductibles as it may feel like a useless upfront payment. However, the upfront payment can actually be beneficial for experienced as well as new drivers, in case of unexpected accidents or in the form of discounted premium.


  • Conflating Co-pay and Voluntary Deductible

Some may confuse one for the other, but co-pay is different from the voluntary deductible. The former is a division of the final claim amount between the insurer and the insured. Meanwhile the latter is an initial payment made by the insured at the time of filing a claim.


  • No-Claim Bonus is the same as Voluntary Deductible

No-claim bonus sometimes gets confused with the voluntary deductible, as it can also help you get a discount on premium. The no-claim bonus is awarded to the policyholder if they have not filed any claims in a given year, in the form of a discount on premium for the next year. This discount can go on increasing in subsequent years that also have no claims. On the other hand, the voluntary deductible discount is brought into effect only at the time of purchasing the policy.


Thorough research is imperative in order to make an informed decision that will provide you with the best possible protection. Assess your financial status, vehicle features, and the policy clauses, provisions and add-ons before confirming policy purchase. Reading the documents carefully can help you avoid any hitches at the time of filing a claim. While voluntary deductibles have certain advantages, they may also affect the claim settlement procedure adversely. Hence, if you want to ensure that claim settlement goes smoothly, know your priorities and the policy limitations before purchasing one.

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FAQs on Voluntary Deductible

What is the main advantage of voluntary deductible?

The primary advantage of voluntary deductible is the discount on premium.


Is no-claim bonus the same as voluntary deductible?

No, no-claim bonus is a reward for not filing any claims in a given year.

Is Copay the same as voluntary deductible?

No, co-pay is the division of total claim amount between insurer and policyholder.


What is the downside of voluntary deductible?

The downside of voluntary deductible is the insured having to bear the majority of repair costs, thus defeating the main purpose of buying car insurance.

What if I am unable to pay a voluntary deductible during claim settlement?

You should opt for a deductible only when you are positive that you can pay the sum as and when the need arises. Since the deductible can bring about a major cut in the your total premium price, you cannot refuse to pay the deductible once a claim is approved.

When should voluntary deductibles be avoided?

Voluntary deductibles should be avoided at all costs if you are sure you cannot readily produce the amount at the time of claims.

Who should opt for a voluntary deductible in car insurance?

If you are sure that you are a responsible driver, opting for a voluntary deductible can be very beneficial. Since you are a safe driver already, you can rest assured knowing that you may not need to pay any deductible if there is no need to file a claim in the first place.

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