The advent of motor finance has not only enabled millions of people own an automobile but also ensured the vehicle’s security through the concept of insurance. Buying a car may not be a big thing as it is a onetime investment or a scheduled EMI but maintaining it for its lifetime is a complex thing for sure. Especially with the kind of roads and the unorganized traffic making an average individual vulnerable to motor accidents, it is very essential that people have a little foresight in getting their lives and their vehicles’ insured. But do the insurance policies really suffice the needs of people when they need it the most? If we analyze about them, we get to know that we need to be aware of the compulsory and voluntary deductibles in car insurance industry.
What is compulsory and voluntary deductibles in car insurance?
let’s get a sneak peek of the car insurance deductibles!
Every Car insurance policy has a stipulated premium rate depending on the Insured Declared Value (IDV) exclusive to that scheme. This ensures insurance claim benefits to the insured as long as they want the payment of premium on regular intervals. Additionally, the insured also have to pay a specific amount called ‘deductible’ from their own pocket at the time of a vehicle insurance claim. it is usually the part of claim amount to be paid by the insured before the insurer agrees to pay the remaining amount of the claim. This is at times a huge amount and usually classified as the compulsory and voluntary deductibles in car insurance.
In this pattern, the insured fixes a stipulated amount to be paid by him/her in every insurance claim which is called a voluntary deductible. People who want to ascertain a discount amount on their insurance premiums are benefitted by this pattern. To make it more precise, voluntary deductible is an undertaking of the insured to pay a certain amount in each of the claims made. This basically allows the insured to avail a decent percentile of concession on their car insurance premium. The higher the policy holder takes the responsibility of paying the claim amount, the lower the insurance premium would be. For example, if an insured person has unfortunately met with an accident and the damage claim amounts to Rs.100,000 approximately, the voluntary deductible in this case would be the amount that insured is willing to pay as part of the claim. However, this percentile is fixed in advance to avoid unforeseen issues.
This particular deductible is the amount pre-fixed by the insurance company to be compulsorily paid by the policy holder at the time of a claim. According to IRDAI (Insurance Regulatory and Development Authority of India), the compulsory deductible can start at Rs.50 for a two wheeler and at Rs.500 for a four wheeler. Generally, the insurance company levies a high deductible if the car is tenured. The insurer comes up with a higher risk of claim for cars with higher cubic capacities or in other situations when the danger of claim is seen as high. Compulsory deductible cases do not consider lowering premiums. Insured declared value (IDV), make and model etc decide the premium as it is calculated considering these elements.
If an individual decides on fixing the voluntary deductible as Rs.30,000, there is a possibility of getting a concession in premium for about 20-25%. However he has to pay the compulsory deductible in addition to the voluntary deductible as set by the scheme provider. Most of the insurance companies include such a clause. To put it in a nut shell, the compulsory deductibles are pre-fixed in a way that they do not attract claims. This deductible also ensures that the insured acts more consciously with the concept of additional charges for the claims in mind. If an insured is at high risk of insuring, he/she is charged a higher compulsory deductible. Since, the corporate insurance firms attempt to maximize their profit while offering multifold benefits to the insured, it becomes the policy holders’ responsibility to thoroughly check the included conditions to spend little on premiums. After all, the idea is to maximize the claim benefits but not the premiums to be paid! Hope this article clears the myths about compulsory and voluntary deductibles in car insurance!!