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Deductibles in car insurance: voluntary and compulsory deductibles

Team AckoApr 30, 2024

When shopping for car insurance, two primary costs are involved — the premium and deductibles. The premium amount is a recurring cost that you pay to the insurer for providing the policy coverage and benefits listed in the policy. And, a deductible in car insurance is the amount you pay from your pocket in the event of a car insurance claim. Are you still confused? In this article, we explain what is a deductible in car insurance and why you should be aware of this cost that you need to pay during claims.

Contents

What are deductibles in car insurance?
How does car insurance deductible work?
Types of deductibles in car insurance
What is a compulsory deductible in car insurance?
What is a voluntary deductible in car insurance?
Difference between voluntary and compulsory deductible in car insurance
What is the role of deductibles in different types of car insurance policies?
When to opt for deductible in car insurance?
- In a nutshell

What are deductibles in car insurance?

Deductibles in vehicle insurance is a cost that you must pay from your pocket before the policy covers the remaining claim amount. The Insurance Regulatory and Development Authority of India (IRDAI) sets the deductible amount. The deductible in car insurance is based on the car’s engine cubic capacity.

There are two types of deductibles in car insurance, and the following section provides an insight into the types of deductibles in four-wheelers and how they impact your claim amount.

How does car insurance deductible work?

Unlike the premium amount, there are no annual deductibles in motor insurance. 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.

Types of deductibles in car insurance

There are two types of deductibles with respect to a car insurance policy. The first type is Compulsory Deductible and the second one is the Voluntary Deductible. As the name suggests, it is mandatory to pay a deductible as per the cubic capacity of the car’s engine under Compulsory Deductible.

The amount to be paid under Voluntary deductible is to be fixed by the policyholder. Some people prefer to set a high amount of Voluntary deductible while purchasing a car insurance policy. However, this can lead to a lower claim amount if you claim for damages that are expensive to get repaired. The policyholder will have to pay for the remaining portion of the claim amount while getting the car repaired. Thus, it is advised to set an affordable value for the Voluntary deductible.

What is a compulsory deductible in car insurance?

Compulsory deductible in car insurance is mandatory, and you have to pay as part of the claim. As per the IRDAI rules, the compulsory deductible is Rs. 1,000 for cars with an engine cubic capacity (cc) of no more than 1,500 cc and Rs. 2,000 for cars with more than 1,500 cc.

A compulsory deductible in car insurance does not increase or decrease the insurance premium you pay since the car insurance premium is based on the model, year of manufacture, and approximate market value or Insured Declared Value (IDV) of the car. To know more about the car insurance cost, you can check the insurance quote for your vehicle through our car insurance premium calculator.

What is a voluntary deductible in car insurance?

As the name suggests, this type of deductible in car insurance is voluntary, and you can decide how much you volunteer to pay from your pocket to repair damages to your car. Choosing to have a voluntary deductible in your car insurance policy decreases your policy’s premium amount; however, your out-of-pocket expense increases during a claim.

You can decide the extent of your deductible when you buy or renew car insurance online. ACKO will pay only the part of the claim amount that is over and above the voluntary and compulsory deductible.

Difference between voluntary and compulsory deductible in car insurance

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:

Voluntary deductible in car insurance	Compulsory deductible in car insurance
Chosen by you	It is mandatory, and the IRDAI fixes the amount
Higher the voluntary deductible, lower the premium amount	Since it is a fixed amount, there is no impact on the premium amount
During claims, you have to pay both voluntary and compulsory deductible	Only the compulsory deductible amount has to be paid by you

What is the role of deductibles in different types of car insurance policies?

Car insurance is primarily of two kinds — Third-party Car Insurance Policy and Comprehensive Car Insurance Policy. While the former type of car insurance policy covers you against third-party liabilities, the latter protects you against damages to your car. Refer to the following points about the role of deductibles in car insurance.

Third-party compensation can be in the form of injury or death of the third party or in case of repair to their property. Since this type of insurance does not cover losses incurred by the insured car, deductibles are not applicable in this type of insurance policy.
Comprehensive insurance offers broader coverage than a Third-party Liability Plan. Hence, it covers the cost of repairing damages to your car, and thus, both voluntary and compulsory deductibles are applicable in this type of car insurance plan.

When to opt for deductible in car insurance?

The amount of voluntary deductible you choose depends on your comfort level and the extent of risk you are willing to take in case of a claim. When you opt for voluntary deductible, the claim amount will be lower and out-of-pocket expenses will be higher. Here are situations where you can choose voluntary deductible in your car insurance policy.

Consider the value of your car. If you own an expensive car, the premium is higher. You can consider a voluntary deductible of a smaller amount so that you can pay a lower premium towards your insurance coverage.
You must note that raising small claims impacts the No Claim Bonus (NCB) you may have earned. Hence, choose a deductible amount equal to the approximate repair amount for which you may avoid raising claims.

In a nutshell

Comprehensive car insurance offers a blanket of coverages to financially secure you against accidents, theft, etc. However, claiming for minor damages can increase the cost upon renewal of car insurance policy. Deductibles are introduced with an intention to reduce the number of claims. Thus, only claim for the damages which very expensive to repair.

Here are some of the commonly asked questions about deductibles in car insurance.

What is the compulsory car deductible amount if the vehicle’s engine is more than 1,500cc?

As per the directive of the IRDAI, the current compulsory deductible amount for cars with an engine capacity of more than 1,500 cc is Rs. 2,000.

What if my deductible amount is more than the repair cost of the damage to my car?

It is recommended that you don’t raise a claim in such circumstances as primarily it is counterproductive and also you will lose the No Claim Bonus discount.

How can I avoid paying the deductible in car insurance?

You must pay the compulsory and voluntary (if opted) deductible in case of a car insurance claim. However, it is recommended that you avoid raising claims for minor damages since you will lose any accumulated No Claim Bonus discount.

Which vehicles in India need compulsory deductible?

All insured vehicles have the compulsory deductible component in their stated policy. As per the directive of the IRDAI, all vehicle owners have to bear the compulsory deductible during claims.

Why are deductibles applied by car insurance providers?

Deductibles are applied by car insurance companies because the compulsory deductible component is mandatory as per the IRDAI’s directive. And, the voluntary deductible component is applicable if you have opted for the same. Apart from these reasons, deductibles in car insurance also encourage you from not raising claims for minor damages and driving safely.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

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