Car insurance is mandatory as per the law. All car owners are compulsorily required to purchase a motor insurance cover. The Motor Vehicles Act of 1988 lays down this requirement to have at least a third-party cover. For someone looking to enhance their cover can opt for a comprehensive policy.
However, buying insurance is often a bewildering experience, especially for new buyers. The reason for it is use of complex jargon. A clear understanding of these various terms will help to make the right policy choice. But one critical term to understand when buying a car insurance policy is the deductible. Continue reading further to have a clear understanding of deductibles.
What are deductibles?
Deductibles, also known as excess in insurance, is neither a type of policy nor an add-on. It is a technical concept that is included in the terms of the policy. Every car insurance policy requires you to pay a stipulated amount from your pocket when a claim is raised. The insurance company pays the entire amount of claim except this amount of deductibles which is mentioned in your policy terms.
Types of deductibles
Deductibles as described above are of two types – compulsory deductible and voluntary deductible.
As the name suggests, a compulsory deductible is mandatory in nature and required for all car insurance policies. The amount of compulsory deductible is determined by the regulator, the IRDAI and is levied for all car insurance policies. For cars, this amount is based on the cubic capacity of the engine, i.e. cubic capacity not exceeding 1500 CC and those exceeding it. For the former category, the amount of deductible is set at ₹1,000 whereas the same increases to ₹2,000 for cars above 1500 CC as its engine capacity. This is summarised in the table below –
|Engine Capacity||Deductible amount|
|Not exceeding 1500 CC||₹1,000|
|Exceeding 1500 CC||
The next type of deductible is the voluntary deductible which as the name suggests is optional when buying your car insurance policy. The voluntary deductible is over and above the compulsory deductible. This can be used a nifty way to further lower the car insurance prices by opting for it. However, you need to remember that choosing for the voluntary deductible will lower the premium at present but will increase the deductible amount that you are required to pay during a claim. Since you undertake to pay an additional amount during claims, the insurance company offers a concession in your premium.
How does the two deductibles differ from each other?
The basic difference between the two deductibles is their nature, wherein one is compulsory to all car insurance policies whereas the other one is optional. A compulsory deductible cannot be modified by you whereas the same can be done in the case of voluntary deductible. The next difference lies in the motive of each type of deductible. The compulsory deductible discourages making claims for minor repairs whereas the voluntary deductible is to facilitate lower premiums.
With car insurance deductible explained in detail, make a thorough decision after analyzing its impact of your premium. While you’re at it, a car insurance calculator can help you decide it which insurance policy to get and select appropriate amount of deductibles in it. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.