How Auto Insurance Deductibles Work

For every vehicle owner, liability insurance under auto insurance is compulsory in India. However, for inclusive coverage, which provides protection against damage other than third party damage such as theft, fire, flood and the like, a full coverage policy is highly recommended. The first thing that comes to mind is the “premium” for this change from liability-only insurance to comprehensive insurance for your vehicle. But here is one way to control the premium, that is to say the voluntary deductible.


Simply put, a deductible is the expense that you pay out of pocket at the time of the claim. An automobile insurance deductible has two components: the mandatory deductible and the voluntary deductible. As can be seen from the names of the categories, the compulsory deductible is that which is obligatory in each complaint in accordance with the regulations. For four-wheel vehicles with a cylinder capacity less than or equal to 1,500 cylinder capacity, this amount is 1,000, while for vehicles over 1,500 cylinder capacity, it is 2,000. On top of that, you can choose to pay a voluntary deductible, based on your own risk assessment or your confidence as a driver.

The need

As a vehicle owner, you may ask yourself the need for a voluntary deductible, when there is already a mandatory deductible as stipulated by the regulator, IRDAI. First of all, the choice of a voluntary deductible encourages the insured to be more vigilant about the maintenance and driving of the car, the financial burden being higher. Second, it discourages policyholders from filing small claims, helping them save on overhead costs associated with the claim.

Complaints, impact on premiums

Suppose your vehicle has a displacement of less than 1,500 cubic meters and you choose to set the amount of the voluntary deductible at 5,000 and the damage is assessed at 25,000, the insurer will only pay you 19,000 (25,000 less 5,000 voluntary deductible). It is important for a policyholder to keep in mind that the deductible amount applies whenever you make a claim on your vehicle and should not be confused with a one-time payment. It is therefore obvious that the higher the voluntary quotient of auto insurance, the lower your premium will be. In fact, you agree to make a higher financial commitment in the event of a claim.

How to decide

A higher deductible means higher reimbursable costs in the event of a claim. So, it is prudent to opt for a higher voluntary deductible only if you think you have the financial cushion to account for these costs and are looking to save money on premiums. However, the premium discount shouldn’t be the only factor to consider when choosing a voluntary deductible, but it is important. .

The author is responsible – Underwriting, SBI General Insurance

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