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The concept of deductible exists not only in motor insurance but also in health and property insurance. Deductibles allow motor insurance companies to shield themselves from trivial claims that the insured may raise for minor repairs. Insurance deductibles are out-of-pocket payments that the insured pays before the insurance coverage begins.


For example, if your four wheeler insurance has a deductible of Rs. 2,500 and the repairs cost you Rs. 10,000. You will have to pay Rs. 2,500 out of your pocket and the remaining Rs. 7,500 is paid by the insurer. However, if the repair is only worth Rs. 2,000, the motor insurance coverage will not kick in and you will have to pay the entire Rs. 2,000 out of pocket.

Why deductibles are required in motor insurance?

Motor insurance presents moral hazards. A moral hazard is a risk that states that two parties entering a contract may not act in good faith and pose a risk to each other. For instance, a car owner with four wheeler insurance may drive recklessly or leave his vehicle exposed to theft or damage just because he is insured.


But when the insured knows that he has to pay a significant amount as deductible, he will be more careful. Deductibles also help you bring down your motor insurance premium costs as you agree to bear a portion of the risk coverage.


Motor insurance companies also use compulsory deductibles to shield themselves from catastrophic losses arising out of numerous minor claims that may simultaneously arise if not mitigated by deductibles. It allows them to avoid minor claims and focus on settling bigger claims that are more important. Thus, helping them serve the insured when it really matters.


If you are planning to renew your four wheeler insurance this year, consider buying Bajaj Allianz vehicle insurance available on Finserv MARKETS. You can renew your car insurance in 3 easy steps and get benefits like No Claim Bonus and instant claim settlement of up to Rs. 20,000 via the Motor OTS wallet. With Bajaj Allianz vehicle insurance you also get cashless repairs across 4,000+ network garages in India, as well as 24x7 road assistance.

Types of deductibles

1. Compulsory deductible

Compulsory deductibles are a fixed amount that you have to pay in case you file a claim for repair of your vehicle. This amount is fixed by the IRDAI and the insurer or network garage has no say over it.


The following are mandatory deductibles fixed by the IRDAI:


  • Vehicle capacity not exceeding 1500 CC – Rs. 1,000
  • Vehicle capacity exceeding 1500 CC – Rs. 2,000
  • All two-wheelers – Rs. 100

You also have to understand that an insurance company can charge a higher compulsory deductible if your vehicle is old and has a higher probability of claims arising. The compulsory deductible has no impact on the premium, which is based on the make, model and the vehicles insured declared value (IDV).

2. Voluntary deductible

Voluntary deductible as the term suggests is an amount that the insured voluntarily agrees to pay in case of a claim. You can choose a deductible amount according to how much you can afford to pay in case of a claim for your four-wheeler or two-wheeler.


By agreeing to pay a portion of the claim, you can bring down your premium costs and save a significant amount of the premium in the long-term. It is a good option for someone who is an experienced driver and is sure that he won’t have to pay out of pocket for small repairs frequently. Higher the voluntary deductible amount, lower the premium you have to pay.


Don’t go for voluntary deductibles just to lower your premium outflow if you are not sure about your riding skills. There are other ways to lower your four wheeler insurance premium such as:


  • Buying motor insurance online after proper comparison.
  • Opting for long-term vehicle insurance policy.
  • Availing discounts for claim-free years through no claim bonus (NCB).
  • Installing anti-theft devices.
  • Avoiding add-ons that are unnecessary.

Deductibles in motor insurance exist for the benefit of the insured and the insurer. While it allows insurance companies to provide better services to customers and avoid losses, it urges vehicle owners to drive safely and take good care of their vehicles. With voluntary deductibles, vehicle owners can save significantly on their motor insurance premium. When you buy Bajaj Allianz vehicle insurance available on Finserv MARKETS, you can enjoy motor insurance discounts up to 30% if you opt for voluntary deductibles.

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