Voluntary Deductible in Car Insurance

A deductible is a part of the claim that a policyholder agrees to pay and the responsibility of the remaining amount is taken by the insurer. Let’s take an example: consider you are organizing a party for your friends where you pay upfront for the decorations and buy snacks for everyone. Your friends agree to pay for the rest of the expenses at the party. This is what a deductible means, you pay a small amount and the rest of the amount is paid by the insurer. 

Now, let's apply the same example in the case of your car. Suppose, you have a car worth 8 lakhs and you protect it with insurance. The insurance premium is Rs. 55,000 and you agree to the deductible of Rs. 10000. This means that in future, if your car faces some damage which is too big for you to cover out of your own pocket, the insurance company will help you. For example, if there is a damage of say 30000/-, you agree to pay Rs. 10000 for the repair of your car and the rest (Rs. 20,000) will be taken care of by your insurer. 

There are two types of deductibles in motor insurance:

1. Compulsory Deductible
2. Voluntary Deductible

Now, let's have a look at the amount that has to be paid in case of compulsory and voluntary deductibles.

The amount for compulsory deductible is decided on the basis of the engine cubic capacity of the vehicle. 

The amount for the voluntary deductible is decided on the basis of the following criteria:

*These discounts should be checked with the insurance company before opting for voluntary deductibles. 

• If you are someone who is confident of their driving skills and has a history of making no to few claims in previous years, then you can consider voluntary deductible. 
• It is not for people who have repeatedly registered for claims previously or people who live in or commute in accident prone places.
•  It can be considered by people who do not travel anywhere close to an accident prone area or where the roads are in an excellent condition. 
•  Even if you are someone who has never filed for a claim, always ensure you opt for a deductible that you can pay. 
• Lastly, if you are driving a vehicle that is quite old, then you should avoid taking a voluntary deductible. 

Choosing a bigger voluntary deductible can help you pay less for your insurance, but you should think about if it's right for you. However, when you decide the voluntary deductible for yourself, never choose an amount that you cannot pay out of your pocket in the first place.

To answer this question, let us first consider an example. 

Raj drives his car every day to get to work. To cut down on his car insurance premium, he decides to go for a higher voluntary deductible of ₹10,000, which reduces his premium by ₹3,000. However, while traveling everyday to work in his car, he ends up having a few bumps and dents on his car for which he has to make two small claims during the year. The repair costs for each incident are around ₹5,000. Had Raj chosen a lower deductible, say ₹2,000, his total deductible expenses for the year would have been ₹4,000. But with the higher voluntary deductible, Raj's total deductible payments amount to ₹10,000. Despite the initial premium savings of ₹3,000, Raj finds that he actually spent a lot more on deductible payments due to the frequent claims he faced. 

In Raj's case, the regular deductible payments resulting from frequent claims offset the premium savings, making the option of a higher voluntary deductible less advantageous for his situation as a daily commuter.

Hence, the answer to whether Voluntary deductible is beneficial or not depends on a lot of circumstances and it is the policymaker who has to decide considering his driving experience, the environment in which he drives and the age of the car. Moreover, it is recommended for a policyholder to analyze the voluntary deductible agreed upon and the costs of any repair that might arise throughout the year. It is better to not file a claim for small expenses in case you have chosen for a voluntary deductible.