Facts About Voluntary Deductible in Car Insurance

Car insurance in India is broadly classified into three types - third-party, own damage, and comprehensive insurance. While third-party insurance is legally mandatory, a comprehensive plan offers wider protection against theft, accidents, and damages. However, its higher premium can be a deterrent for many. To make premiums more affordable, the concept of a voluntary deductible was introduced. 
 

In this blog, we will explore key facts about voluntary deductibles in car insurance and whether they can help you save on your premium costs.

A voluntary deductible in car insurance is a part of the claim money that a policyholder chooses to pay on his behalf, while the insurance company can reimburse the remaining amount. This helps to reduce the policyholder’s regular premium payments.

Now, there are compulsory deductibles in car insurance as per the insurance policy, however, voluntary ones totally depend on the policyholder’s choice. This decision can be economical for some people, while some might face losses depending on some factors and the driving environment. We will know about them in detail further in this blog.

Many factors and reasons influence a policyholder's decision to choose or not choose a voluntary deductible in their car insurance. However, here are a few facts about voluntary deductibles that you should know before making your decision.

Picking the right deductible is only the beginning. How you handle your deductible throughout the year could make a substantial impact on your car insurance experience as a whole.

Pick a deductible you can afford at claim time

Always choose a deductible you can easily pay out of pocket without putting yourself under financial strain.

Keep deductible consistent with claim record

For the most part, if you're not filing claims, choosing a heavier deductible can save you some bucks on your premium. But, if you find yourself claiming the insurance frequently, then a lighter deductible will be safer.

Think of your driving chance of accident

Motorists in areas of great traffic or prone to accidents should go for a smaller deductible, whereas the ones rarely involved in accidents can choose a larger one.

Look at the premium savings by comparing

Do not decide to raise your deductible only to find out that the resulting saving in the premium is not worth the additional risk taken.

Take your vehicle's worth into account

Cars that are either brand new or very expensive really warrant coming with small deductibles, while a vehicle that is not so new can go with a big deductible.

Verify the aggregate deductible price

Don't forget that you are going to be liable for both the compulsory and voluntary deductible, so give thought to the full amount before making a decision.

Unlike the premium amount, the deductible is applicable only during claim. You are accountable for your policy’s stated deductible whenever you submit a claim. Once you pay the deductible, ACKO will pay the repair cost or claim amount balance.
Here is an example of how car insurance deductible works.

You have a deductible of Rs. 1,000 and Rs. 25,000 in damage from covered accidental damage.

ACKO might pay Rs. 24,000 to repair your car, while you are responsible for paying the remaining Rs. 1,000 from your pocket.

Please note that this example does not consider depreciation, and is simplified for explanatory purposes.

The table below shows the discount on car insurance premiums when you opt for a voluntary deductible:

As the voluntary deductible amount increases, the insurer offers a higher discount on the Own Damage (OD) premium component of the car insurance policy.

Yes, increasing the voluntary deductible generally reduces your car insurance premium, specifically the Own Damage (OD) premium component.
When you choose a higher voluntary deductible, you are taking on a greater share of the financial risk. Since the insurer’s liability reduces, they reward you with a lower premium.

Therefore, the more you make your voluntary deductible, the greater the discount you can potentially get on your yearly premium. For example, a ₹3,000 voluntary deductible would be able to get you a 12% discount, on the other hand, a ₹6,000 choice could allow you to save around 22-28% on the Own Damage premium.

Apart from voluntary deductibles, another common type of deductible in car insurance is the compulsory deductible or involuntary deductible. This is a fixed amount that the policyholder must pay out of pocket when filing a claim, regardless of fault. It is mandated by the insurance company and cannot be changed by the policyholder. Unlike voluntary deductibles, which are chosen to lower premium costs, the compulsory deductible is set by the insurer based on several factors. It ensures both insurer and policyholder share claim responsibility and promotes safe driving.

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 in Motor Insurance from Voluntary Deductible:

Some of the benefits of choosing voluntary deductibles are as follows:

Listed below are a group of people who should opt for Voluntary Deductibles:

Overall, a Voluntary deductible is a great feature in car insurance. It provides flexibility to people who want comprehensive car insurance but at a lower price. However, you must remember, it is not an economic decision for all. Make a detailed analysis of all the possibilities, your personal traits, and your financial condition, and make your decision.