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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.

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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 increasing your voluntary deductible. It trims your insurance bill.

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

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 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 voluntary deductible:

In a car insurance if you wreck your car, the amount that you agree to pay towards any future repairs of his car is your voluntary deductible. You have to deposit this at the time of paying the annual insurance premium.

This is then later settled in your repair bill at the time of claim settlement. As a part of the claim excess, the voluntary deductible is added to the compulsory deductible amount in advance.

How does voluntary deductible work?

The higher the amount of voluntary deductible, the lower will be your premium. That’s because you earn more discount on your annual insurance premium.

Check this detailed table that shows the impact of voluntary deductible on the insurance premium:

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

For instance:

Let’s consider you have a claim amount of Rs. 10,000. Rs. 500 is the compulsory deductible. Along with it, you declare a voluntary deductible amount of Rs. 1,500. Your expenses towards the cover of his claim would be Rs. 500 + Rs. 1,500 = Rs. 2,000 while the insurer will cover the rest of Rs. 8,000.

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 that amount from your pocket. Because then you can’t back out.

Who benefits the most with voluntary deductible?

Are you confident of your driving skills? Because if you’re a cautious, alert, and fabulous driver, the chances of claim would few. Thus, the voluntary deductible can be of great use to you.

So choosing a voluntary deductible to earn discount son premium depends on your driving skills.

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’s a waste of money

It is often misunderstood to be an extra amount that you have to pay on your insurance 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!

Also 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. This lass currently works as a Content Writer at Coverfox.