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Like most people of his age, Rakesh, 34, had a desire to own a car. He had done his research and almost finalized the model. While reading up and talking to people about the documents that are required to finance a vehicle and to buy motor insurance, he got to know about the different types of insurance and their features. It is very important to understand a financial product properly before purchasing one. Rakesh had a faint idea of terms like insured declared value and no claims bonus but he was confused by deductibles that were a part of vehicle insurance policies. Let us try to understand what deductibles are and how they function. There are two major types of motor insurance—third-party and comprehensive.

Third-party liability cover:

It is mandatory to have third-party insurance for every vehicle that is plying on the roads. It is a basic insurance plan that covers the legal and physical liabilities due to a third-party. For instance, a vehicle owner meets with an accident and injures someone but is not in a position to pay for the victim’s treatment. In the absence of third-party insurance, the victim will be the loser. To avoid situations like these the government has made third-party insurance compulsory. In case of accidents, the insurer pays the victim. The Motor Vehicles (Amendment) Bill, which was recently passed by the parliament, proposes to add the driver’s attendant to third-party cover. Third-party vehicle insurance has lower premiums.

Comprehensive motor insurance:

The mandatory third-party insurance doesn’t cover the damage to the vehicle in any way. To cover the vehicle’s damage, you will have to buy comprehensive insurance, which provides all-round coverage. A comprehensive insurance policy provides coverage against damage due to a variety of reasons such as natural calamities, man-made disasters, and theft.

Motor insurance policy

Source: Syafiznur Saeden on Slideshare

The type of motor insurance to get depends entirely on the needs of the vehicle owner. Having third-party insurance is compulsory by law, but getting comprehensive insurance is a more practical solution. For starters, it comes with an extensive coverage option. Additionally, policyholders are provided with an option to add special features such as engine protection cover. At Finserv MARKETS, you can buy vehicle insurance online through a hassle-free process. But when you opt to buy comprehensive vehicle insurance, the insurer will ask you to choose a deductible limit.

What is deductible?

The deductible is an amount that has to be paid by the policyholder before the insurer takes responsibility to pay the remaining claim. In simpler words, it is a threshold which has to be breached for an insurance claim to kick in. For example, you buy a policy with a deductible limit of Rs 1000. You meet with an accident and claim Rs 5000 from the insurance company for the damages. The insurance company will pay Rs 4000, only after you pay Rs 1000 from your pocket.

There are two types of deductibles. Compulsory deductibles and voluntary deductibles.

Compulsory Deductibles

The insurance company while selling the four wheeler insurance policy to you will inform you about the compulsory deductible amount. It is fixed by the insurer and the policyholder has no say in the decision. The amount of compulsory deductible largely depends on features such as the age of the vehicle and engine capacity. Companies tend to fix a higher compulsory deductible limit if they deem the risk to be high. The compulsory deductible doesn’t influence the premium of the policy. As per the insurance regulator, compulsory deductible ranges from Rs 50 for two-wheelers to Rs 500 for four-wheelers.

Voluntary Deductibles

Besides compulsory deductibles, motor insurance comes with a voluntary deductible clause. The voluntary deductible is decided by the policyholder depending on the affordability. Insurers provide a discount on vehicle insurance premiums if you choose a higher voluntary deductible limit. Having a voluntary deductible deters people from driving carelessly and damaging the car as they will have to pay a part of the claim before the insurance company pays the balance. People who have confidence in their driving skills and are cautious drivers can opt for a higher voluntary deductible and save on insurance premiums.


Deductibles promote road discipline in drivers as losses due to damage to the car will have to be partly borne by the policyholder. Even though choosing a high voluntary deductible amount helps in reducing the insurance premium, it should not be the only guiding factor. You should compare the amount that will have to be paid out of pocket in case of an accident with the overall benefits of reduced premiums. You can buy a Bajaj Allianz motor insurance through Finserv MARKETS and avail features such as cash-free services and round the clock assistance.


Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!