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Deductibles In Car Insurance & It's Benefits


According to The Motor Vehicles Act, 1988, driving an uninsured vehicle on the streets of India is an offence. A vehicle owner must obtain insurance. The registration certificate of the vehicle can be cancelled and the owner can be penalized until he/she obtains or renews the car insurance policy.

Deductibles are the sum of money that is required to be paid by the policyholder at the time of the insurance claim. It requires the insurance holder to bear the expenses of the compulsory deductibles, which is aimed at discouraging insurance holders from making frequent and frivolous claims.


For eg: In case of an accident, you have filed a claim of Rs. 10,000 from the insurance company and deductibles amounts to Rs. 500. In this case, the company will make good a sum of Rs. 9500.


What are the different types of deductibles?

The different types of deductibles can be categorized into compulsory and voluntary. 


Compulsory Deductible

Compulsory deductible aims to distribute the risk between the company and policyholder in case of an accident. The compulsory deductible is a fixed, pre-determined sum of money decided by the insurance company in association with the IRDA guidelines. This amount is determined on several factors including the capacity of the engine. The insurance company can increase this amount in case the engine is old and in case of factors that increase the chance of claims. A couple of advantages of this deductible include:

·         Unlike voluntary deductibles, this amount does not affect the car insurance premium.

·         In the unfortunate instance of an accident, the policyholder will require to pay only the compulsory deductible amount.


Voluntary Deductibles

This deductible can be opted for voluntarily by the car insurance policy holder. This amount is decided by the policyholder after taking into consideration several factors. The holder agrees to take on a part of the risk in case of an accident by making good the loss to a certain extent. The advantages of opting for this voluntary deductibles include:

·         Opting for a higher deductible will result in lower premiums. However, in case of a claim, the policyholder will require to pay the compulsory deductible as well as voluntary deductible which can amount to a significant amount.


·         Not opting for voluntary deductibles will result in a higher premium and a higher compensation in case of a claim.


Before applying for car insurance, it is important to understand the impact of the deductibles on your finances. Research is vital before deciding on the voluntary deductible amount. Opting for a lower deductible might work in favour of a good driver with a good track record. Opting for a lower deductible might not offer a less experienced driver the protection required.


Going through the fine print and familiarizing yourself with the policies prior to paying the car insurance price can avoid hassles in the future.

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