Compulsory vs. Voluntary Deductible in Car Insurance

by Kotak General Insurance Insurance Consultant

As a car owner, you always hope to keep your car safe from damage. But it’s not really possible. You can definitely rely on your driving skills and be sure to never run into an accident or collision on your own. But unforeseen situations like natural calamities or a car behind you ramming into you can put your car through minor or major damage. So, what are you going to do? Why not just get a car in the first place so you are immune to financial or physical damage? Definitely not! You should go ahead and get your car insured.

If you are hesitant to buy car insurance, then let us tell you that it’s okay. The insurance jargon and the unlimited advertising could be intimidating. But what you can do is learn, research, analyze, and compare the car insurance options available on the market. However, the question remains: what should you research? What are you supposed to analyse and what should you compare against what?

Some common factors that you must keep in mind are premium amount, coverage, customer service, claim settlement ratio, and deductibles.

People don’t often have any difficulties understanding most of these factors, but what are the car deductibles? That’s a term that leaves most people confused. It makes them think, "I am buying car insurance. I am paying my premiums on time. Then why am I paying car deductibles too?" Well, it’s good to question that because it has landed you here to know what car deductibles are and their types.

What are the car deductibles?

In simple terms, car deductibles are the amount that you pay from your pocket when you file a claim. If your vehicle is insured, you will have to bear a certain amount of deductibles in the event of any damage. Once you pay that, the remaining amount of the claim will be compensated by your insurance company.

But why do you have to pay car deductibles?

Let’s just say that these deductibles help car insurance companies regulate the responsibilities of car owners or policyholders. Since deductibles are the amount of money you pay from your pocket, you will be much more careful about keeping your car safe. This also helps car insurance companies avoid small claims.

Car deductibles are unavoidable if you are buying a comprehensive car insurance policy. In the case of third-party or liability car insurance, you do not pay any deductibles. So, if you are a comprehensive car insurance policyholder, you are obligated to pay deductibles.

These are the two types of deductibles that are part of your car insurance.

Compulsory Deductible

A compulsory deductible in car insurance is the mandatory deductible amount that is decided by your insurance company before you buy the policy. Every policyholder has to pay this deductible amount as per the Insurance Regulatory Development Authority of India (IRDAI). The criteria for a compulsory deductible are as follows:

The deductible amount for private cars with a capacity of 1500 cc and above is two thousand rupees.

The deductible amount for private cars with a capacity of 1499 cc and below is one thousand rupees.

However, the amount can increase in the case of older cars as they are at a higher risk of damage or breaking down. Since the compulsory deductible is unavoidable, you have to make sure that you choose the right car insurance policy.

Voluntary Deductible

As the name suggests, a voluntary deductible in car insurance is the amount that you personally choose to pay. This amount is decided by your and your car insurance company before buying the policy. Voluntary deductibles are paid on top of compulsory deductibles.

Since compulsory deductibles are unavoidable, there’s not much to think about. But for the voluntary deductible, you have to be wise and considerate if you need it. The amount you decide to pay could be more or less, and it would affect your premiums. If you pay the more voluntary deductible, you will pay fewer premiums and vice versa.

Now that you know about deductibles, you can keep this in mind when planning to buy car insurance. Not everything is in your control, but you can choose to decide if you pour in more money or less. To make this decision, you will need to spend time researching and relying on your gut a little. However, under any policy, your and your insurance company's end goal is to minimise your financial burden.

For more information, visit the Kotak General Insurance website.