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Understanding Voluntary & Compulsory Excess in Car Insurance

Many times you might have heard or read that your car insurance premium can be reduced by opting for higher excess or deductible. Deductible or excess is the amount you are willing to pay from your own pocket at the time of claim. Let us understand the Compulsory & Voluntary deductible concept with an example: Mr. Ajay has purchased a car insurance policy with Compulsory deductible amount as Rs.2000 and had also opted for Voluntary deductible of Rs.5000 at the time of purchasing the policy. One bad day while travelling on the highway during the monsoon season he met with an accident and the front part of his car was damaged due to the impact. He has approached the insurance company for claim settlement and the final claim settlement amount was arrived to Rs.25, 000. Now the Voluntary deductible of Rs.5000 and the Compulsory deductible of Rs.2000 are to be borne by the insured as agreed at the time of taking the policy. So the total amount to be paid by the customer is Rs.7000 and the remaining amount of Rs.18000 will be paid by the insurance company. In short the risk bearing capacity of the customer at the time of claim is called as Deductible, this concept is introduced to prevent petty claims and increase the accountability of the customer.

Excess or deductible in car insurance is the amount to be borne by the insured customer at the time of claim. Each car insurance policy has a compulsory deductible or excess which is to be borne by the insured customer at the time of claim settlement and the remaining claim amount is settled by the insurance company.

Compulsory Deductible/Excess:

Compulsory deductible or excess is mentioned in every type of insurance policy and the amount varies from one insurance product to the other. The compulsory deductible in car insurance is applicable for each and every claim at the time of claim settlement. Insurance companies release the payment only after the customer has paid for the compulsory deductible or excess. The compulsory deductible in car insurance is as mentioned below:

Type of Car Compulsory Deductible or Excess
Private Car with cubic capacity less than 1500cc Rs.1000
Private car with cubic capacity exceeding 1500cc Rs.2000

Voluntary Deductible/Excess:

The voluntary deductible or excess is the amount agreed to be paid by the insured at the time of claim settlement and the remaining claim amount will be settled by the insurance company. The first party car insurance covers the loss or damage to the insured’s car due to fire, act of god perils such as cyclone floods, malicious damage, theft, earthquake, accidental external means etc. The voluntary excess is the way of bearing more percentage of the claim amount at the time of an accident. Below are the discounts offered to reduce the own damage premium in case of car insurance:-

Voluntary Deductible Discount
Rs.2500 20% on the OD premium, subject to a maximum of Rs.750/-
Rs.5000 25% on the OD, subject to a maximum of Rs.1500/-
Rs.7500 30% on the OD, subject to a maximum of Rs.2000/-
Rs.15000 35% on the OD, subject to a maximum of Rs.2500/-

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