If you own a car, you may already be aware of terms like voluntary deductible and compulsory deductible. Even if you don’t own the car of your dreams just yet, these are terms you must know inside out.
Why? Because they’re related to the most important part of your car—Insurance. You wouldn’t want to take that lightly now would you?
Before we proceed further, and before you think twice about getting your car insured, you need to know why getting Car Insurance is mandatory in India. Well, now you know that there can’t be any second thoughts about getting your car insured.
What exactly is a deductible?
We’re sure you’re aware of the fact that once you get your car insured, the insurance company takes care of all the damages or repair charges (depending on your premium and the insurance policy of course). But, before the insurance company takes over, you need to pay a certain amount from your pocket to take care of the damages. This amount is called the deductible.
Classifying it further, there are two types of deductibles—voluntary and compulsory.
What is compulsory deductible?
As the name suggests, this is that part of the damages that you’re supposed to pay from your pocket (compulsorily) before the insurance company can pay for the rest. This concept is applicable to every policyholder, irrespective of the policy they’ve opted for. Don’t worry! This has no impact on the premium you’re supposed to receive for your policy.
The compulsory deductible amount is most likely to be fixed for your policy. For instance, if you’re supposed to pay Rs. 2,000 towards compulsory deductible, you’ve to pay that irrespective of the extent of damages. The rest, of course, would be paid by your insurer.
Additional Reading: How To Choose The Right Car Insurance Policy
What is voluntary deductible?
It’s the part of the damages you volunteer to pay in case of damage to your vehicle. Since you get to decide the exact amount, keeping factors like affordability and risk in mind becomes necessary. Instead of impulsively choosing the amount, you must take some time and ponder over other expenses for the month. Before taking a decision, you need to set your priorities right.
Additional Reading: How To Manage Big Future Expenses Successfully
‘Why would I volunteer to pay for the damages?’
This is probably one of the first questions that must’ve popped up in your head. Well, the good part about volunteering to pay for the damages is that you get to avail discounts on the premium you pay.
The more you pay as the voluntary deductible, the better discount rates you can avail. Although, these discounts vary according to the insurers and their policies, you’re more likely to get attractive offers on the premium. Sounds like a good deal, right?
Additional Reading: Factors That Determine Your Car Insurance Premium
What’s the purpose of these deductibles?
In case you think that the mere existence of these deductibles makes things complicated for you, you’re wrong! Well, maybe things become a bit difficult to understand, but these ultimately exist for your benefit.
The primary reason for the existence of these deductibles is that it helps reduce the instances of claims. Since people know that they’re liable to pay some part of the damages, they not only become more careful while handling their vehicles, they also think twice before making claims.
If a person chooses to pay a high amount as the voluntary deductible just because they want to avail a better discount on the insurance premium, they know that even a small amount of damage could mean a hole in their pocket. As a result, they pay more attention to traffic signals and drive with caution.
Additional Reading: When NOT To Claim That Car Insurance
What are the main differences between voluntary and compulsory deductibles?
- While compulsory deductible is fixed and usually decided by the insurer, when it comes to the voluntary deductible, you get to decide the amount.
- Voluntary deductible is something you can choose to take, depending on your other expenses and risks involved unlike compulsory deductible.
- Regardless of whether you’ve chosen to pay the voluntary deductible or not, your choice can still impact your finances. In case you’ve opted for it and you’re willing to make a claim, don’t forget that you’re supposed to pay both the compulsory and voluntary deductibles. But, in case you haven’t opted for it, the compulsory deductible is all you will be required to pay.
After reading the differences between the two, we’re pretty sure you can decide whether opting for a voluntary or compulsory deductible makes sense or not. Since it completely depends on your financial situation, the risks involved and your driving skills (of course), you need to make a wise decision.
Psst…is that space in your garage still vacant? It’s time to fill it up with the car of your dreams!