As per the Motor Vehicle Act, third-party car insurance is mandatory for all vehicle owners. However, it is always recommended to procure comprehensive car insurance that offers protection to damages against third parties and damages against your vehicle. On the other hand, it cannot be denied that an all-inclusive car insurance plan is costly because it offers wide coverage. That is why many car owners avoid buying such a policy, but by doing so they expose their vehicle to theft and damages.
In contemporary times, people choose a voluntary deductible when buying car insurance online if they do not want to pay a lot of money in the insurance premium. Here we will talk about the voluntary deductible, its various advantages and the ways it can reduce the premium.
Voluntary deductible in a car insurance policy
Voluntary deductible in a car insurance policy can be best defined as the fixed amount which the policyholder agrees to pay when purchasing car insurance online. It is nothing like a mandatory deductible, but it is entirely the car owner’s choice that is neither imposed nor influenced by the insurance provider.
For example, suppose you have bought an all-inclusive car insurance policy with a voluntary deductible of Ã¢âÂ¹2,000. Now, your vehicle gets damaged in an accident and would require Ã¢âÂ¹20,000 for repairs. In that case, the insurance company will deduct a mandatory deductible that is selected by the regulatory authority (based on the capacity of the car’s engine) besides the voluntary deductible of Ã¢âÂ¹2,000 from the claim amount. Hence, if the mandatory deductible is Ã¢âÂ¹1000, you will have to pay Ã¢âÂ¹1000+Ã¢âÂ¹2,000= Ã¢âÂ¹3,000 and the insurance company pays Ã¢âÂ¹17,000.
What role is played by voluntary deductible in reducing premium?
By choosing voluntary deductible in a car insurance policy, one lessens the liability of the insurance company by assuring to pay a part of the claim amount. Therefore, the insurance company finds a decreased payout on claims and decides to decrease the premium amount to a certain extent.
It should be noted that the amount of voluntary deductible selected by the policyholder is inversely proportional to the premium amount which the policyholder pays. In other words, the higher the voluntary deductible, the lower the car insurance premium cost.
Top lesser-known facts about voluntary deductible in car insurance
- One needs to pay the voluntary deductible only if they make a claim
- Voluntary deductible is not similar to co-payment
- It is not an extra expense
- Mandatory deductible cannot be skipped even if you choose a voluntary deductible
One needs to pay the voluntary deductible only if they make a claim
It is compulsory to pay the voluntary deductible when you claim your car insurance policy. Also, it is not required to pay the voluntary deductible unless the insurance company approves the claim. After the claim is approved, the insurance company asks to pay the deductible amount, after which the insurance company settles the remaining bill amount.
Voluntary deductible is not similar to co-payment
A common misconception about the voluntary deductible is it is similar to co-payment. However, the reality is voluntary deductible is a fixed cost that a policyholder is required to pay, while co-pay is the percentage of the claim expense that needs to be paid by the policyholder.
It is not an extra expense
Another misconception amongst people is that voluntary deductible is an additional expense which the policyholder is required to pay. In actuality, there is nothing extra that you need to bear for a voluntary deductible in the car insurance policy. Choosing this deductible is a decision that is entirely based on the policy purchaser and the insurance company can never exercise any influence in this matter.
Mandatory deductible cannot be skipped even if you choose a voluntary deductible
One should not think that by choosing a voluntary deductible they will not have to pay the mandatory deductible amount. It is a rule to pay the mandatory deductible along with the voluntary deductible when you raise a claim for car insurance.
If you buy a car insurance policy, it is significant to make a practical decision on the voluntary deductibles. Those who are a cautious driver, with a good income, can choose higher voluntary deductibles to take advantage of a low premium. In actuality, it is essential to weigh out the benefits of a decrease in premium with the expenses that you will have to bear at the time of a claim. It would be wise to customise your policy based on your need so that your chosen policy can work in your favour.