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​Voluntary deductible is a commonly used car insurance terminology. It is the amount that the insured agrees to pay for future repairs of his car, in the event of a crash. It is mandatory for the policyholder to pay the amount before the insurer contributes to the rest of the claim value. Apart from the voluntary deductible, the insured also part pays for a compulsory deductible, which provides to a greater extent at the time of a claim.

Let’s understand it properly with an example-

If your repair costs Rs. 2000, and you choose for a voluntary deductible worth Rs. 1000, this is paid well in advance as an investment towards the repairs of your car. The remaining claim amount will be covered by the insurer, up to the limits mentioned in the insurance policy. As the amount matching to voluntary deductibles chosen by you increases, you will have to pay a smaller premium.

You can avail discounts on your car insurance premium in case you have opted for a voluntary deductible while buying the policy. A Voluntary deductible is a minimum amount that you choose to pay from the claim amount. The higher the deductible amount, the lower is your insurance premium.

Here are a few common misunderstandings about voluntary deductibles explained-

Unwanted investment -

Some people think that voluntary deductibles are useless, especially being a skilled driver. But you never know what can happen on the roads and what’s lying ahead of you. An experienced driver would feel hesitant to pay upfront for a future mishap when he is already careful on the streets. However, the upfront payment can prove to be valuable for a skilled/noob driver equally. There are several benefits of voluntary deductibles in the long run.

Co-pay vs. Voluntary deductibles – Policyholders usually get confused between the concepts of Co-pay and voluntary deductibles. However, there is a considerable difference between these two clauses. The difference depends on how the car owner makes the payment. Voluntary deductible is paid first when the policyholder files a claim. Once this has been done, the insurance company settles the remaining amount. Whereas, in the case of co-payment, the final claim amount is divided between the insurer and the policyholder, as per the percentage agreed upon in the car insurance policy.

Same as No-Claim Bonus - Voluntary deductible is usually confused with No-Claim bonus. No-Claim bonus is a reward that the policyholder gets when he does not file any claims in a year. The same amount is discounted from the premium for the following year. Additionally, the discount keeps on increasing with subsequent claim-free years. Moreover, the voluntary deductible is allowed only once, which is at the time of policy purchase.

Since both co-payment and voluntary deductible clauses provide you with discounted premiums, you should not opt for these without proper research. You must determine whether you really need to include these in your policy and work out the cost-benefit analysis for the same. You can make a decision based on your findings. It is also imperative that you understand the clauses included in your car insurance policy. Hence, you should read the policy documents carefully and make an informed decision about add-ons, and avoid hassles during the time of claims.