Car Insurance 371 views April 22, 2021

Car Insurance can protect your car and finances in case of an accident, theft, natural calamities, etc. But when going for car insurance, people face difficulty while understanding complex technical terms. Two such terms are Compulsory Deductibles and Voluntary Deductibles. It is essential to understand these terms to choose a suitable car insurance policy for yourself. A deductible can affect your claim settlement process and premium amount.

Here, we will first understand what exactly is a deductible before getting to the difference between Compulsory Deductibles and Voluntary Deductibles. So, let’s start right away!

What is a Deductible?

As the name suggests, a deductible is an amount that a policyholder needs to pay from his/her pocket during the claim settlement, while the insurer will pay the remaining claim amount.

Let’s understand this with an example. Suppose your car insurance claim amount is INR 5,000. If you have a deductible of INR 1,000, the insurer will only pay INR 4,000 (5,000 – 1,000) as you will need to bear INR 1,000 as a deductible.

The deductible is divided into two types — Compulsory Deductibles and Voluntary Deductibles. In the next section, we are going to tell you the difference between these two deductibles.

Let’s Check Out the Differences

In the below table, you can see the differences between Compulsory Deductibles and Voluntary Deductibles based on different factors.

FactorsCompulsory DeductiblesVoluntary Deductibles
AmountThe IRDAI has fixed an amount that you need to pay as a compulsory deductible. However, it can be increased by the insurer after checking several factors.Policyholders can choose the amount according to their needs, budget and confidence in driving skills.
Affect on Premium AmountNo effect on the premium amountInversely proportional to premium amount (on choosing a higher deductible, the premium amount will be less)
What amount does a policyholder need to pay in case of a claim?You will only need to pay the fixed compulsory deductibles.Here, you will need to pay both compulsory and voluntary deductibles as chosen by you.
SavingsDoes not help in savings as the amount is fixed throughout your policy termCan be helpful in long-term savings due to its direct effect on the premium amount

To understand these differences in detail, you need to understand both Compulsory and Voluntary Deductibles individually. We are going to discuss the same below that you can check.

Compulsory Deductibles

As you can see from its name, Compulsory Deductibles are a predefined amount that a policyholder has to pay in case any claim arises. Also known as compulsory excess in car insurance, it is part of the overall claim amount defined by the Insurance Regulatory Development Authority of India (IRDAI). Compulsory deductibles are fixed based on the engine capacity of your car. To know more, check the below table.

Engine CapacityCompulsory Deductible Amount (In INR)
Up to 1,500cc1,000
Above 1,500cc2,000

However, an insurance company can increase the compulsory deductible amount after assessing the age, insured declared value (IDV), type and model of your car.

Voluntary Deductibles

In contrast to Compulsory Deductibles, Voluntary Deductible is a part of the claim amount that a policyholder can choose before raising it to the insurer. Simply put, you can voluntarily choose the claim amount that is supposed to be given by the insurer in the first place.

As you are taking responsibility in claims, the insurer offers a discount on the premium amount. The higher is the amount of voluntary deductibles chosen by a policyholder, the lower will be the premium amount towards the car insurance policy. A vehicle owner who is confident of his/her driving skills can choose higher voluntary deductibles to get a higher discount on the premium amount.

Also, you will need to pay voluntary deductibles along with the compulsory deductibles in case of a claim. For example, if you choose a voluntary deductible of INR 3,000 and a claim of INR 10,000 arises, you will need to pay INR 4,000 (3,000 + 1,000 as compulsory deductibles) from your pocket. The remaining amount of INR 6,000 (10,000-4,000) will be paid by the insurer towards the claim settlement.

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