An Overview of Deductibles in Car Insurance

When a policyholder raises a claim against his/her car insurance policy, insurance companies pay the major part of the claim amount, if the claim is accepted. This implies, the entire claim amount is not borne by the insurance company and the policyholder needs to contribute his/her share at the time of claim settlement. The contribution borne by the policyholder is known as a deductible.

The deductible amount is based on the cubic capacity of a car’s engine. As per The Motor Vehicles Act, 1988 if the cubic capacity of a car’s engine is less than 1500cc, the deductible amount is Rs. 1000. For cars with engines having a cubic capacity of more than 1500cc the deductible amount is Rs. 2000. Paying a deductible is mandatory for any kind of insurance claim and is not limited to vehicle insurance.

What are the Types of Deductibles?

There are two types of deductibles with respect to a car insurance policy. The first type is Compulsory Deductible and the second one is the Voluntary Deductible. As the name suggests, it is mandatory to pay a deductible as per the cubic capacity of the car’s engine under Compulsory Deductible.

The amount to be paid under Voluntary deductible is to be fixed by the policyholder. Some people prefer to set a high amount of Voluntary deductible while purchasing a car insurance policy. However, this can lead to a lower claim amount if you claim for damages that are expensive to get repaired. The policyholder will have to pay for the remaining portion of the claim amount while getting the car repaired. Thus, it is advised to set an affordable value for the Voluntary deductible.

What is the Difference Between Compulsory and Voluntary Deductible?

As mentioned earlier, the deductible is a part of the claim amount which is supposed to be borne by the policyholder at the time of claim settlement. Here are the factors that differentiate Compulsory Deductible from Voluntary Deductible:

  1. Paying a Compulsory deductible is mandatory whereas paying a Voluntary Deductible is optional.
  2. If you do not opt for a Voluntary deductible, you only have to pay the Compulsory deductible at the time of claim. However, if you opt for a Voluntary deductible, you will have to pay both – Voluntary as well as Compulsory deductibles at the time of claim.
  3. The amount of Compulsory Deductible does not have a direct effect on the cost of a vehicle insurance policy. On the other hand, if you decide to pay a Voluntary Deductible, the cost of vehicle insurance will reduce.

What is The Role of Deductibles in Types of Car Insurance Policies?

A car insurance policy can be of two types – Third-party Liability Policy or a Comprehensive Car insurance policy. The former type is meant only for the fair compensation of the third parties who suffer a loss because of the insured car. The compensation can be for the repair of property damage or for the cost of treating injured people. As this type of policy does not offer coverage for repairing the damages caused to the insured car, a deductible amount is not applicable.

A Comprehensive Car Insurance Policy offers a wider coverage as compared to a basic third-party policy. It covers the cost of repairing the damages caused to the insured car and thus, both Compulsory and Voluntary deductibles are applicable to this type of policy.

The Bottom Line

Comprehensive car insurance offers a blanket of coverages to financially secure you against accidents, theft, etc. However, claiming for minor damages can increase the cost of your car insurance policy upon renewal. Deductibles are introduced with an intention to reduce the number of claims. Thus, only claim for the damages which very expensive to repair.

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