When it comes to car insurance, you've probably heard about the concept of a "deductible.". But what is a voluntary deductible in car insurance exactly? Well, think of it as the amount you agree to pay out of your pocket before your insurer comes in to cover the rest in case of a claim. Unlike deductibles imposed by insurers, which are non-negotiable, voluntary deductibles are something you get to choose based on your needs and financial situation. Opting for a deductible indicates you are willing to take on more risk, which can result in lower premiums, as the insurer sees you as a less risky policyholder.
Who doesn't like saving money on insurance premiums, right? We do! So, let us explore whether opting for a higher deductible to reduce your premium is a smart financial decision or not.
Voluntary Deductibles in Car Insurance
Let’s say you opt for car insurance online and want to know more about voluntary deductibles. The table below will help you understand how the voluntary deductible is calculated.
| Voluntary Deductible |
Discount on Premium |
|
INR 2,500
|
20 per cent on the Own Damage premium of the vehicle, subject to a maximum of INR 750
|
|
INR 5,000
|
25 per cent on the Own Damage premium, subject to a maximum of INR 1,500
|
|
INR 7,500
|
30 per cent on the Own Damage premium of the vehicle, subject to a maximum of INR 2,000
|
|
INR 15,000
|
35% on the Own Damage premium of the vehicle, subject to a maximum of ₹2,500
|
Please keep in mind that these numbers could vary depending on the insurance company. It's always best to consult your insurer for information regarding deductibles and any associated discounts.
Why would you want a higher voluntary deductible?
- Having Confidence in Driving Skills: If you're a confident driver and have a clean record without any accidents or claims, choosing a voluntary deductible in car insurance could be a wise decision. Your low-risk profile reduces the likelihood of needing to file a claim, leading to savings on your premium.
- Residing in a Safe Neighbourhood: Living in a safe area with lower accident risks can also support opting for a higher voluntary deductible. With fewer chances of requiring to make claims due to the neighbourhood’s low accident rate, selecting a voluntary deductible can be more appealing and result in reduced premiums.
- Financial Preparedness: If you have sufficient savings or financial stability to cover the increased deductible amount in case of the event of a claim, opting for a higher voluntary deductible may be practical.
When does a voluntary deductible NOT make sense?
- Limited savings: If you lack savings to cover the elevated deductible amount, it may not be the most prudent choice.
- High-risk profile: If you've had accidents before or often drive in accident-prone areas, choosing a voluntary deductible could be risky because it might lead to significant out-of-pocket expenses if you make a claim.
- Minimal savings: Sometimes, the extra savings from a voluntary deductible may not be worth it, especially when the difference in premiums is minimal.
- Older vehicle: When you have an older vehicle, insurance costs usually go up. Since the voluntary deductible is a percentage of the premium, it also increases accordingly.
Conclusion
Voluntary deductibles in car insurance allow you to customise your car insurance based on your needs and budget. However, don't rush into opting for a voluntary deductible without carefully considering the advantages and disadvantages to ensure it's the best decision for you.
By consulting with your insurance provider and taking a thoughtful approach, you can make a well-informed decision while optimising your savings.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the relevant industry. It is advised to verify the relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.