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Essential Facts about Voluntary Deductible in Car Insurance!

Karen Menezes Karen Menezes 04 May 2016

Think voluntary deductible is a great way to lower your car insurance premium? Is it really worth it? That’s the question. Read this article to find out.

Car insurance Deductible

Planning to buy an insurance policy? The one thing you’d stress on is the premiums.

You have to make sure you receive adequate coverage against affordable premium. Fortunately, you do have options to save up. And one among them is to opt for a voluntary deductible. It trims your insurance premium.

Let’s learn and understand all about voluntary deductible.

What is voluntary deductible?

First let’s figure out what is deductible.

The part of monetary loss that is usually borne by you is called deductible or claim excess. It’s classified into:

  1. Compulsory Deductible
  2. Voluntary Deductible

1. Compuslory Deductible:

For those who don’t know what compulsory deductible is, here’s a run-through:

Based on the engine capacity, insurers in agreement with IRDA decide the compulsory deductible for private cars. As per the Indian Motor Tariff, the rates given below are standardized for the compulsory deductible amount for private cars.

  • For cars less than 1,500 cc – Rs. 1,000
  • For cars exceeding 1,500 cc – Rs. 2,000

Now heading over to

2. Voluntary Deductible:

In a car insurance, the amount that you agree to pay towards any future repairs of your car at the time of claim is voluntary deductible.

This is then later settled in your repair bill along with compulsory deductible at the time of claim settlement.

How does voluntary deductible work?

The higher the amount of voluntary deductible, the higher will be the discount. And lower will be your car insurance premium.

Here's how voluntary deductible helps to reduce the car insurance premium:

Voluntary DeductibleDiscount
Rs. 2,50020% on the Own Damage premium of the vehicle, subject to a maximum of Rs. 750
Rs. 5,00025% on the Own Damage premium of the vehicle, subject to a maximum of Rs. 1,500
Rs. 7,50030% on the Own Damage premium of the vehicle, subject to a maximum of Rs. 2,000
Rs. 15,00035% on the Own Damage premium of the vehicle, subject to a maximum of Rs. 2,500

Let's see an example

Let’s consider you have a claim amount of Rs. 10,000.

You own a car having an engine capacity less than the 1,500 cc, for which Rs. 1000 is the compulsory deductible.

Let us say, you had opted a voluntary deductible amount of Rs. 1,500 at the time of buying a car insurance policy.

at the time of claim, the total expenses would be Rs. 1000 + Rs. 1,500 = Rs. 2,500, while the insurer will cover the rest of Rs. 7,500.

NOTE: Always remember that you should increase your voluntary deductible only up to an amount that you can afford at the time of claim. You should be able to easily spend voluntary deductible amount from your pocket, at the time of repair under the insurance policy. Because then you can’t back out.

Who should opt for the voluntary deductible?

Are you confident of your driving skills? Because if you’re a cautious, alert, safe and skilled driver, the chances of claim would be almost zero, and you will be saving money. Thus, the voluntary deductible can be a great way to save loads of money on your premium.

It would be beneficial in the true sense to those people who are skillful driver and confident about it.

Misunderstandings with Voluntary Deductible

Though it is a simple concept of paying your accidental repair costs, people usually misunderstand it. There are many things that are likely to confuse you with voluntary deductibles.

You’d probably think it an additional amount one pays but it's not...

An extra amount that you have to pay on your insurance premium. in fact, it's the other way round - it helps to bring down the premium.

But, no! It’s not an add-on cover. Voluntary deductible is a part amount of the repair bill you promise to pay at the time of claim. In fact, your premiums drop down with this.

You may think it’s pointless to pay for accidental claims when you’re always cautiously driving. However, don’t ignore the fact that as a cautious driver, it’s you who would profit the most out of the voluntary deductible policy.

You get to considerably reduce large chunks on premium costs. That’s what you get!

It’s different from No-Claim Bonus

Another belief is that voluntary deductible is same as a no claim bonus. It will add up another large chunk of discount to your next premium.

Wait! That’s isn’t so.

NCB is a discount on premium for not making a claim. With voluntary deductibles, if you don't avail one, it doesn’t lead to any further discounts in your upcoming premium.

The benefits of a voluntary deductible are awarded only once. And that is by allocating a discount on the annual insurance premium charges.

Voluntary Deductible is not a one-time payment

Don’t get confused by this. Some assume that voluntary deductible is a one-time payment, while the insurance is needed to be renewed annually.

However, voluntary deductible is added up annually and is valid up to the term of the insurance only. In event of an accident, you have to pay this pre-decided part money of your car repair bill only at the time of a claim.

In a nutshell, if you avail for voluntary deductible, you only receive a discount on the annual insurance premium. But in return agree to partially bear losses during claim.

So always think wisely before deciding your voluntary deductible amount.

Need more gyaan? Check out this awesome video about voluntary deductibles in car insurance!

Recommended Read: Know your IDV in Car Insurance

Karen Menezes
Written by Karen Menezes
An optimist at heart, Karen loves to see the world through a pair of rose-tinted glasses. An award-winning blogger, she loves to dream with her eyes open. Writing is not her passion, it’s an OCD! If at all she isn’t writing, you can find her shopping online or experimenting with DIY recipes.